July 4, 2013 / 3:21 PM / 5 years ago

UPDATE 1-Commerzbank shares soar on upbeat shipping comments

* CFO says now is more optimistic for shipping loans

* Commerzbank shares up 8.2 percent, reversing earlier losses (Adds comments from fund manager, analyst)

FRANKFURT, July 4 (Reuters) - Commerzbank is more optimistic about its shipping business, easing investor concerns about the German bank’s exposure to the struggling sector and sending its shares sharply higher.

“We have always said that we expect provisions for bad ship loans to remain stable in 2013 at high levels and nothing has changed, except that I am a bit more optimistic today than several months ago,” Chief Financial Officer Stephan Engels said in an interview published on Commerzbank’s intranet and seen by Reuters on Thursday.

Shares in Germany’s second biggest bank, which was bailed out by the German government during the financial crisis, gained as much as 8.2 percent after the comments, rebounding from a new all-time low of 5.56 euros reached earlier in the day.

The shipping industry has been hit hard by the economic downturn and also by overcapacity as a result of new ships ordered during the pre-crisis boom now coming on to the market.

According to trade journal Marine Money, Commerzbank is currently the world’s second-largest ship financier after Norway’s DNB.

Commerzbank’s most recent financial report shows that its shipping unit Deutsche Schiffsbank had a default volume of 4.6 billion euros and a non-performing-loan ratio of 25 percent on its portfolio.

The CFO’s remarks about the shipping sector echoed recent comments by peer DVB Bank, which is also among the top 10 players in ship finance. Depressed shipping valuations should be showing signs of a recovery by 2014, DVB’s Chief Executive Wolfgang Driese said last week.


Commerzbank’s stock has been under pressure for a variety of reasons. It has lost about a quarter of its value over the past two weeks, underperforming the wider bank sector, which has been relatively stable.

Last week, for example, there was speculation that Commerzbank might be forced into fire sales of some of its ship portfolio. The bank, however, denied that it had any such plans.

Also last week, ratings agency Moody’s published a report saying that Commerzbank was unlikely to see positive effects from its cost and risk reduction efforts before 2015-16.

Commerzbank is to cut 5,200 jobs in a restructuring that includes focusing on medium-sized businesses and private customers as well as shedding none-core assets.

There has been speculation too that Commerzbank might drop out of Germany’s blue chip index DAX for the first time since the index was set up 25 years ago - a move that would force some institutional investors to sell their Commerzbank shares.

“Commerzbank has a reputation for slipping on banana skins,” said fund manager Matthew Beesley from Henderson Global Investors, one of the lender’s top 10 shareholders.

“We see Commerzbank as a fundamentally challenged franchise and struggle to build an appropriate investment case accordingly,” he said.

Index strategist Klaus Stabel from brokerage ICF, however, said he did not expect Commerzbank to leave the DAX in September when Deutsche Boerse re-evaluates the index’s composition.

“Right now, Commerzbank is not last in terms of market capitalisation. I do not think that anything will happen soon,” he said.

Reporting by Arno Schuetze, Kathrin Jones, Sinead Cruise, Anika Ross. Editing by Jane Merriman

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