Saturday, January 10, 2009

The financial crisis: Commerzbank's mixed blessing

Germany's government bails out Commerzbank, amid renewed anxiety about financial markets

IT WAS meant to be the transformative deal of German banking, when, just four short months ago, Commerzbank agreed to buy Dresdner, an ailing rival. The chief executive of the former, Martin Blessing, called it a “unique opportunity” to build the biggest retail and small-business bank in Germany. The takeover, which is due to be finalised soon, may still promise that, but it has now become transformative in another way. As a result of the deal, Commerzbank becomes the first German bank to be partly nationalised by a government bail-out fund that was set up a few months ago.

On Thursday January 8th Commerzbank said it would get a capital injection of €10 billion ($13.7 billion) from the government, just weeks after it tapped the bail-out fund for €8.2 billion. A small portion of the new money will be used to buy a 25% stake in Commerzbank, but most is in the form of loans that count towards the bank's core capital. A bank that now has a stockmarket value of less than €4 billion has received more than €18 billion in just a matter of weeks. ...


[Source: The Economist: News analysis

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