Germany may consider Commerzbank stake sale after election

FRANKFURT Tue Jul 16, 2013 12:20pm EDT

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FRANKFURT (Reuters) - German policymakers may look at selling the state's 17 percent stake in bailed-out lender Commerzbank (CBKG.DE) after national elections in September, sources close to the leading political parties said.

Investment bankers have asked for meetings with the Finance Ministry to pitch their ideas for the state's exit from the country's second-largest lender, a person familiar with the German government said on Tuesday.

But the strategy for selling shares in the loss-making bank may be a part of negotiations to form a new government, the sources said, meaning no decisions will be taken until after the September 22 polls.

"Before then, nothing will happen," the person said.

Germany has been left with shares in Commerzbank following its rescue of the bank during the 2009 financial crisis that drove a number of major European lenders to the brink of collapse. Its stake is worth 1.25 billion euros ($1.63 billion)at current prices.

The Finance Ministry has repeatedly said it wants the government's investment to be as short-lived as possible, but no decision has been taken as to when the shares could be sold.

Spain's Banco Santander (SAN.MC) has considered investing in Commerzbank, German daily Die Welt reported on Tuesday, citing financial sources.

Germany's Focus magazine reported on Saturday that Finance Minister Wolfgang Schaeuble had spoken to the chairman of UBS UBSN.VX about the possibility of the Swiss bank buying the government's Commerzbank stake.

Commerzbank, Santander and UBS declined to comment.

If Chancellor Angela Merkel's government is re-elected, as opinion polls currently indicate, major policy changes are unlikely. However the two coalition partners - the conservative CDU and the liberal FDP - have different views on the Commerzbank stake.

"Economy Minister Philipp Roesler and his FDP want a speedy exit, as they generally favor keeping the state's role in economics as small as possible," a person familiar with the party's thinking said.

The CDU and Finance Minister Schaeuble, on the other hand, support the idea of minimizing losses on the state's investment, which would mean holding the shares for longer.

Commerzbank's shares trade at 6.46 euros - far below the roughly 26 euros that Germany would have to sell at to avoid losses.

In Britain, the government is expected to start selling its 39 percent stake in Lloyds Banking Group later this year with the shares trading comfortably above break-even level.

But a sale of its 81 percent stake in Royal Bank of Scotland (RBS.L) remains a long way off with the shares trading well under the level to avoid a loss. Both stakes were acquired in government bailouts.

A change in the German government to a leftwing coalition of Social Democrats and Greens may slow down a Commerzbank share sale. They see safeguarding jobs and the bank's role as a major financier of Germany's industrial backbone as more important than ending the government's involvement, people familiar with the parties' thinking said.

The mostly likely scenario is that the next government will sell the shares via a series of placements with institutional investors, such as pension funds, over the next couple of years, people familiar with Berlin's thinking said.

The government may even decide to keep a long-term investment of 10 percent to ensure German companies have an alternative to bellwether to Deutsche Bank (DBKGn.DE) they can rely on, one of the sources said.

Another possibility is that a competitor buys the stake as a first step to an eventual takeover.

But some bankers said any buyers would most likely wait until Commerzbank completes a substantial overhaul of its business, and even then there is little appetite for big bank takeovers.

"Any foreign bank looking to widen its footprint in German retail banking will likely wait until the revamp has been completed," an investment banker said.

The lender been restructuring ever since its acquisition of Dresdner Bank in 2008. Credit ratings agency Moody's recently said that it did not expect positive results from efforts to reduce costs and risks before 2015 or 2016.

"The time of big bank mergers in Europe is over for the time being," another investment banker focussing on financial institutions said.

"All banks are currently in downsizing mode and no bank would be able to come up with the capital requirements for such a move." ($1 = 0.7664 euros)

(Additional reporting by Annika Breidthardt, Alexander Hübner, Jonathan Gould, Sarah White, Katharina Bart and Matt Scuffham; Editing by Erica Billingham)

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