Commerzbank sees bleak 2013 as it fishes for investors
FRANKFURT (Reuters) - Commerzbank CBKGk.DE, Germany's No.2 lender, will have to work hard to entice investors to its 2.5 billion euro ($3.3 billion) share call this month after painting a bleak outlook for the rest of this year.
Chief Financial Officer Stephan Engels said 2013 would be a year of transition for the bank, which posted a net loss of 94 million euros in the first three months as it booked a 493 million euro restructuring charge linked to 4-6,000 job cuts.
"Revenues will stay under pressure, costs are expected to increase," Engels said on Tuesday, adding the bank hoped to see positive effects from its revamp next year.
A source with knowledge of the bank's capital increase said Commerzbank may therefore have to offer new shares at a hefty discount of about 50 percent. The source also said Commerzbank could knock at least 35 percent off the theoretical ex-rights price of the new shares, implying that these may be sold at around 5.50 euros apiece.
"Commerzbank will need a lot of persuasive power to enthuse investors to buy the new Commerzbank shares," said Felix Scherhaufer from LBBW Asset Management.
Commerzbank shares rose 1.8 percent by 1117 GMT, as analysts pointed to slightly better-than-expected quarterly earnings. They had expected a loss of 125 million.
However, investors criticized the bleak outlook.
"The better first quarter results so far give no hint of a fundamentally better business development in 2013," said Lutz Wockel from fund manager NordLB Capital Management.
Commerzbank's Engels said he expected the bank's interest income to decrease in 2013 as the low interest rate environment makes it increasingly difficult to make money. Costs are set to rise by up to 100 million euros each quarter due to investments, including for a revamp of its retail business.
The lender will also set aside "slightly more" money for bad loans, Engels said. Last year, Commerzbank - whose cash cow Mittelstandsbank unit specializes in providing loans to Germany's important medium-sized companies - benefited from extremely low provisions as Germany's economy powered ahead most of the year.
Commerzbank did not provide a more specific earnings forecast.
Commerzbank intends to use the proceeds from the capital increase to repay some of the state aid it received in the financial crisis and to strengthen its capital buffers to comply with stricter bank rules.
The transaction will increase Commerzbank's capital ratio under the most stringent application of Basel 3 rules by around 1 percentage point, Engels said. He added that the bank is targeting a 9 percent capital ratio by the end of 2014.
In the first quarter, the ratio stood at 7.5 percent.
By comparison, rival BNP Paribas (BNPP.PA) has a capital ratio of 10 percent, Deutsche Bank (DBKGn.DE) - which last week raised 3 billion euros in a capital increase - 9.5 percent, Goldman Sachs (GS.N) 9 percent, JP Morgan (JPM.N) 8.9 percent and Credit Suisse (CSGN.VX) 8.6 percent.
Since a 2008 bail-out in the wake of the financial crisis, the German government owns 25 percent of Commerzbank, but its holding will be diluted to roughly 18 percent as it will not participate in the capital increase.
(Additional reporting by Alexander Hübner; Editing by Sophie Walker)