Commerzbank AG (CRZBY)

[Enterprising Investor]

Commerzbank Rises to 2-Year High as ECB Test Seen Passed (4/02/14)

Commerzbank AG (CBK), Germany’s second-largest bank, advanced to a two-year high as some investors speculated that Chief Executive Officer Martin Blessing may have taken sufficient steps to pass a Europe-wide stress test.

Commerzbank climbed as much as 2.5 percent in Frankfurt trading and increased 1.5 percent to 14.03 euros at 1:40 p.m. The benchmark Bloomberg Europe Banks and Financial Services Index was little changed. Commerzbank’s shares have more than doubled in value from a record low of 5.56 euros in July.

“Fears that the stress test could reveal holes or cause problems for the bank appear to be declining,” said Michael Seufert, a bank analyst at Nord/LB in Hannover. “Some investors see a turnaround story.” He recommends investors hold the stock and has a 12-month price estimate of 13 euros.

The European Central Bank is conducting a comprehensive assessment of the euro area’s 128 most significant banks before becoming the currency bloc’s single supervisor in November. The assessment includes a probe into whether banks have adequate capital for selected loan portfolios. Commerzbank’s non-core assets, which include shipping and commercial real estate loans and municipal and government debt, have been a concern for investors.

In February, Commerzbank said that it expected to reduce its non-core assets faster than estimated, to about 75 billion euros by the end of 2016 from a previous goal of less than 90 billion euros. In its annual report published about two weeks ago, Commerzbank said it expected a smaller loss from its non-core asset business in 2014 than the 1.07 billion euros it posted last year, which reduced total profit for the company.

To contact the reporter on this story: Shane Strowmatt in Frankfurt at [e-mail]

http://www.bloomberg.com/news/2014-04-02/commerzbank-rises-to-2-year-high-as-ecb-test-seen-passed.html