FRANKFURT (Reuters) - Commerzbank (CBKG.DE) is in no rush to pay back the German government’s remaining “silent participation” or non-voting capital that the lender received in the financial crisis, its chief executive said.
“We will pay interest on the government’s silent participation and therefore there is no pressure to pay it back,” Martin Blessing told Sueddeutsche Zeitung newspaper in an interview.
Commerzbank said in November that it expects to pay interest on the non-voting capital this year, after years of not paying because it had failed to turn a full-year profit under German HGB accounting standards.
“In any case, the silent participation is only recognized as equity capital until the end of 2017. At that point at the latest, it doesn’t make economic sense anymore,” Blessing told the paper, referring to the phase-out of silent participations under new Basel III capital rules for banks.
The German government bolstered Commerzbank with billions of euros in aid in the financial crisis and still holds a 25 percent stake in Germany’s second-biggest lender.
After paying back the lion’s share of the government aid, Commerzbank still has about 1.6 billion euros ($2.12 billion) in so-called silent participation, on which it would expect to pay nearly 150 million euros per year in interest.
However, Commerzbank has not had to pay interest so far because under its agreement with the government, it is not required to do so as long as it posts a loss.
Commerzbank has said it places a higher importance on paying a dividend to shareholders before it repays the remaining silent participation but sees a dividend payment as unlikely before the 2014 financial year.
($1 = 0.7555 euros)
Reporting by Jonathan Gould; Editing by Hans-Juergen Peters