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Commerzbank pulls off an unlikely trick

Issuer: Commerzbank
Size: e760 million
Bookrunners: Commerzbank Securities, Morgan Stanley
Date: November 12 2003

  Commerzbank share price ()
  Source: Reuters

By simultaneously announcing a disastrous set of results and successfully raising substantial straight equity capital on November 12, Commerzbank pulled off a trick that would barely have been conceivable six months ago for almost any issuer, let alone a German bank.

The results included a €2.05 billion pre-tax loss for the first nine months of 2003 and an unexpected €2.3 billion write-down. The write-down comes mainly from the falling value of large stakes in mortgage bank Eurohypo and fund manager Jupiter but importantly is not credit related.  

The substantial goodwill reductions included in the write-down reduced core capital by €2 billion, taking the tier-one ratio down to 6.4% from 7.7%, necessitating the capital increase.

Third-quarter results were weak on other fronts too. Commerzbank reported a core operating loss after provisions of €73 million and analysts were unimpressed by the guidance on costs and revenue growth for 2004.

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