Commerzbank AG on Wednesday announced plans to repay euro14.3 billion ($20.3 billion) in aid from the German government by June, saying that it aims to return most of the money it received at the height of the financial crisis with help from a capital increase.
Germany's second-biggest bank said it plans to return the rest of the government rescue fund's euro16.2 billion "silent participation," or non-voting holding, "by 2014 at the latest."
For the first repayment, it said it would use euro3.27 billion in excess capital and raise euro11 billion through a complex, multi-stage capital increase.
CEO Martin Blessing said the bank was now able to hand back the capital help after returning to profitability. He noted that it also has made progress in integrating Dresdner Bank, which it acquired in 2009, and had strengthened its finances.
"Our business model works. That gives us the chance to repay the silent participations sooner than expected and in one package reduce them by around 90 percent," Blessing said.
After the state's "silent participation" stake is repaid, the government bank rescue fund will still be left with a regular 25 percent in Commerzbank.
The move will also put the bank's capital structure into better shape to meet the requirements of the so-called Basel III regulations, which do not count non-voting holdings as core capital reserves.
Commerzbank said it was expecting an operating profit "above plan" for the just-concluded first quarter, and that it expects to be able to pay a dividend for 2012.
The announcement boosted the bank's shares. Commerzbank was trading 3.5 percent higher at euro5.80 in Frankfurt by early afternoon.
Chancellor Angela Merkel's spokesman, Steffen Seibert, welcomed Wednesday's announcement. He noted that the government always intended aid measures to be "as limited as possible in terms of time."
However, Finance Ministry spokesman Martin Kreienbaum said he was not aware that any "concrete point in time" is currently envisioned for the government to sell its regular 25 percent stake.
That holding gives the government a blocking minority, which allows it to veto major decisions.
The capital increase will require approval by the annual shareholders' meeting, which is being moved up to May 6 from May 18.
The company said in February that it aimed to reduce the government's participation "significantly" in 2011, but gave no details as it announced that it made a fourth-quarter and full-year profit as loan-loss provisions declined and markets recovered.
The government rescue fund will get a one-time payment of euro1.03 billion, to be booked in the second quarter, Commerzbank said Wednesday.
Geir Moulson reported from Berlin.