Commerzbank, Intesa Seek 13.25 Billion Euros as Basel Rules Loom
April 6 (Bloomberg) -- Commerzbank AG and Intesa Sanpaolo SpA, Germany and Italy's second-biggest lenders, plan to raise as much as 13.25 billion euros ($19 billion) before Basel regulators implement rules forcing banks to hold more capital.
Intesa plans to sell as much as 5 billion euros of new shares by July, the Milan-based lender said in a statement today. Frankfurt-based Commerzbank plans to raise 8.25 billion euros from investors to help repay its government bailout.
European banks are bolstering capital before rules designed by the Basel Committee on Banking Supervision that require banks to more than double the capital they hold take effect in full in 2019. Commerzbank and Intesa led European bank stocks higher, while the cost of insuring European financial bonds dropped to the lowest in five months, on optimism the offerings will help European banks to pass the next round of European stress tests and stem contagion from the sovereign debt crisis.
"It's the right time for a share sale," Fabrizio Spagna, chairman of Axia Financial Research, said in a phone interview. "It will consolidate Intesa's capital position at a higher level to comply with Basel III requirements."
Intesa climbed 1.5 percent to 2.16 euros as of 11:10 a.m. in Milan trading, for a market value of about 27 billion euros. Commerzbank advanced 1.5 percent, to 5.69 euros in Frankfurt trading, bringing its market value to about 7.7 billion euros.
Credit-default swaps on Commerzbank's subordinated debt fell 43 basis points to 272, the lowest since November, according to CMA. That helped drive the Markit iTraxx Financial Index linked to the junior bonds of 25 banks and insurers down 13.5 basis points to 217.5 at 10 a.m. in London.
Deutsche Bank
Deutsche Bank AG, Germany's biggest bank, completed a record 10.2 billion-euro share sale in October to fund the takeover of Deutsche Postbank AG and bolster reserves. Chief Executive Officer Josef Ackermann ruled out an additional fundraising for the lender on April 1, saying his bank was already "well capitalized."
The lender said yesterday in the invitation to its annual general meeting in May that it will seek shareholder approval to raise as much as 18 billion euros more capital, the Wall Street Journal reported today. The shares fell 1.7 percent to 41.20 euros in Frankfurt.
Commerzbank plans to repay about 14.3 billion euros in state aid by June by selling new shares and using excess capital. Germany's bank-rescue fund, Soffin, will convert silent participations into 2.75 billion euros of shares, the Frankfurt- based lender said in a statement today. The lender will also redeem silent participations of 3.27 billion euros with excess regulatory capital, it said.
Return to Profit
"We have returned to profitability one year earlier than expected," allowing the company to pay back almost 90 percent of the state aid, CEO Martin Blessing said in a statement. "We intend to repay the then remaining sum of about 1.9 billion euros from future excess regulatory capital by 2014 the latest."
The bank said in February that it wants to redeem this year a "significant" portion of the 16.2 billion euros it received in silent participations from Soffin, which also bought a 25 percent stake in the company. The lender needed the aid after agreeing to buy Dresdner Bank amid the global financial crisis. Silent participations are a form of non-voting capital that exists in Germany and was used by the country's government to recapitalize lenders.
Two-step Fundraising
The bank will raise 11 billion euros from investors and Soffin in two steps. Starting today, it will sell mandatory exchangeable bonds that will turn into shares within about five weeks. In a second step, the lender will conduct a rights offering. Soffin will take part in both transactions and maintain its stake of 25 percent plus one share. The amounts raised in the two transactions will depend on demand.
Commerzbank's core Tier 1 ratio, a measure of financial strength, will total 8.8 percent after the transaction. Intesa's core Tier 1 ratio will increase by 150 basis points following its fundraising. A basis point is 0.01 percentage point.
"We are well armed already for the Basel III guidelines," Commerzbank's Blessing said in a speech today.
Intesa will sell common stock to owners of common and savings shares and expects to complete the offering by July.
The share sale follows capital-raising plans by Banco Popolare SC and Unione di Banche Italiane SCPA. Banca Monte dei Paschi di Siena SpA may call a board meeting next week to approve a 2 billion-euro rights offer, two people familiar with the situation said yesterday.
"The proposal for a capital increase arises from Intesa's decision to fully comply with immediate effect with what is believed will become the 'new normal' for Basel III," the bank said in the statement.
To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net Sonia Sirletti in Milan at ssirletti@bloomberg.net
To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net
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