During the financial crisis, the state saved Commerzbank from collapse with billions of euros. The remaining share package is now to be sold off gradually. But taxpayers are likely to suffer losses.
Around 16 years after entering the financial crisis, the state wants to gradually divest from its stake in Commerzbank. The federal government is planning a limited first step in the sale of shares, according to the Ministry of Finance. It is not clear when the federal government will pull out completely. It is a long way from being a profitable deal.
On Tuesday evening, the Federal Finance Agency announced that the federal government was planning to withdraw from Commerzbank. As a first step, the federal government wants to reduce its 16.49 percent stake in Commerzbank, which it holds through the Financial Market Stabilization Fund (FMS).
Florian Toncar, Parliamentary State Secretary in the Federal Ministry of Finance and Chairman of the relevant inter-ministerial steering committee, said that Commerzbank was once again a stable and profitable institution. “It is therefore necessary for the federal government to gradually divest itself of its shares in the successfully stabilized institution.”
Billion-dollar rescue in the midst of the financial crisis
The state used a lot of taxpayers’ money to save the major Frankfurt bank, which had swallowed up the struggling Dresdner Bank in the middle of the global financial crisis, from collapse. Commerzbank received capital aid of 18.2 billion euros from the FMS in 2008 and 2009. According to the finance agency, around 13.15 billion euros have been repaid so far. However, the state is still the largest single shareholder in the DAX group.
At the current price level, the remaining state stake in the bank is worth around 2.5 billion euros. At the time, the share package cost around five billion euros. In order to make a profit, a share price of just under 26 euros would have to be reached – Commerzbank shares were recently quoted at just under 13 euros.
Unlike the rescue of Lufthansa, which the state saved during the Corona pandemic and made a profit of more than 700 million euros from the sale of its shareholding, the taxpayer is likely to be left with losses at Commerzbank.
The proceeds from the sale of the Commerzbank shares will flow into the Financial Market Stabilization Fund, which was also used to support other institutions during the financial crisis. At the end of 2023, the deficit accumulated at the FMS amounted to around 21.6 billion euros, according to the finance agency.
Commerzbank has turned things around
Commerzbank has long since emerged from the crisis after a far-reaching corporate restructuring. Last year, the DAX-listed group reported a record profit of around 2.2 billion euros. CEO Manfred Knof has tightened the austerity measures since taking office at the beginning of 2021: the bank cut thousands of jobs and significantly reduced its branch network in Germany. Net profit is expected to rise to 3.4 billion euros by 2027.
The federal government is likely to have viewed the development with favor. At the beginning of the year, it had already announced that it wanted to sell more company shares. The economic policy spokesman for the FDP parliamentary group, Reinhard Houben, called the sale of the federal government’s shares in Commerzbank a good signal. “The federal government is thus continuing its clear line of divesting itself of company shares again.”
Federal government divests state holdings
In February, the federal government sold shares in Deutsche Post worth more than two billion euros. The federal government wants to use this money for a planned equity increase at the state-owned Deutsche Bahn.
“State participation can make sense in individual cases. However, the basic prerequisite is that the state withdraws from companies when its participation is no longer necessary. Against this background, the federal government should also divest itself of the majority of its shares in the energy group Uniper and not use up the planned deadline of 2028,” said Houben.
Will government exit attract new investors?
The planned exit of the state is fueling speculation about other major investors entering Commerzbank or even a takeover. Deutsche Bank boss Christian Sewing promptly rejected these ambitions on Wednesday. “We are focusing on Deutsche Bank,” said Sewing at the “Handelsblatt” banking summit in Frankfurt. A takeover of Commerzbank by Deutsche Bank would “not be an issue” under his leadership, the manager said when asked.
Commerzbank has repeatedly been considered a takeover candidate for banks from Germany and abroad. There was speculation about a sale of Commerzbank to the Italian Unicredit. Deutsche Bank and Commerzbank had also previously negotiated a merger. The talks failed in 2019.
Commerzbank CFO Bettina Orlopp said at the “Handelsblatt” conference that the news from the financial agency was proof that Commerzbank was on the right track. If interested parties came knocking on the door of the bank, they would look into it. “Our top priority, however, is to move Commerzbank forward.”
Source: Stern
