Commerzbank AG (CRZBY)

[Enterprising Investor]

Commerzbank profit nearly doubles; to issue new shares (4/28/15)

FRANKFURT — Commerzbank AG will issue new shares worth around 1.4 billion euros to strengthen its capital base after improved first-quarter results boosted by higher revenues.

In an unexpected release on Monday after markets closed, the country’s second-largest lender said it will sell as many as 113.85 million new shares to institutional investors to improve its capital adequacy. The bank is partially owned by the German government.

The measure is set to increase Commerzbank’s leverage ratio, which compares loss-absorbing capital to total assets, to 3.9% from 3.4% and its equity capital ratio to above 10% from 9.5%. Investors reacted coolly, with Commerzbank shares falling 3.6% in the after-market trading session.

Commerzbank’s larger domestic rival, Deutsche Bank, in a separate statement on Monday revealed that it plans to increase its leverage ratio to more than 5% in the expectation of tighter banking rules.

The Commerzbank move was a bit of a surprise. Deutsche Bank analysts had said in a recent research note that they didn’t expect Commerzbank to carry out a capital increase, which they considered to be a downside risk for the bank’s shares.

Commerzbank boosted its net profit to €366 million in the first quarter, up from €200 million the same quarter a year earlier and above a €227 million consensus of analysts polled by Commerzbank.

At the same time, the lender boosted revenues by €522 million to €2.8 billion, propelled by an uptick in capital market transactions, positive valuation effects and unspecified one-time gains. The results were also helped by lower loan loss provisions, which fell by one-third to €158 million.

http://www.marketwatch.com/story/commerzbank-profit-nearly-doubles-to-issue-new-shares-2015-04-28