Commerzbank AG (CBK), the biggest loser on Germany’s benchmark DAX Index this year, has recently steepened its decline because of unfounded speculation about risks in its shipping portfolio, said Chief Financial Officer Stephan Engels.
“The stock retreat isn’t at all fundamentally justified,” Engels, 51, said today in an internal memo to staff obtained by Bloomberg News. “There’s renewed speculation about risks in our shipping portfolio. We on the management board find that incomprehensible.”
Commerzbank is selling assets and allowing loans to expire to comply with European Union requirements for 18.2 billion euros ($24 billion) in state aid the Frankfurt-based firm received in 2009. That portfolio, comprised of credit to shipping companies hit by oversupply in the freight industry as well as commercial real-estate loans and sovereign debt, is loss-making.
The shares have fallen 6.8 percent this week, extending losses this year to 42 percent, after a June 26 Dow Jones Newswires report raised speculation that offers for loans the bank plans to sell would require writedowns on its shipping portfolio. The stock rose 7.2 percent as of 4:35 p.m., after reaching a record intraday low earlier in the trading session.
“We’ve always said we expect unchanged high risk provisions for 2013,” Engels said. “Nothing has changed about that except that today I’m actually a bit more positive than I was a few months ago, as are other market participants.”
Engels said the speculation triggered “market technical reactions” that forced some shareholders to sell in order to comply with their own investment rules, according to the memo.
Repossessing Ships
Commerzbank also fell along with other financial stocks on concern related to a potential resurgence of Europe’s sovereign debt crisis and the European Central Bank’s plan to evaluate the financial health of banks, he said in the memo.
Commerzbank’s press department declined to comment on the contents of the memo.
The lender, whose soured shipping loans prompted a ratings downgrade by Standard & Poor’s in May, is repossessing ships from its debtors as it tries to salvage some of the 4.5 billion euros it holds in bad debt from the crisis-hit industry.
It’s holding off on a sale of the vessels until values recover, Stefan Otto, the head of the shipping unit, said in an interview with Bloomberg News published on June 13. The bank is focusing on ships in which it sees “significantly more upside than downside,” Otto said at the time.
Commerzbank, which had shipping loans of 18 billion euros in the first quarter, became the world’s second-biggest financier of ships with the 2009 acquisition of Dresdner Bank.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
