German economy boosts Commerzbank

AP News
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Posted: May 06, 2011 3:37 AM

Buoyant banking conditions in the fast-growing German economy and better results in eastern Europe helped Commerzbank increase profits in the first quarter, the bank said Friday.

Its bank working with small and midsize companies in Germany _ a mainstay of the economy _ saw operating earnings rise to euro415 million ($601 million) from euro314 million a year ago. Germany's No. 2 bank also said its business in eastern Europe showed profits up at euro78 million from euro6 million a year ago.

Commerzbank's shares rose 0.4 percent to euro4.20 in morning trading German time.

The Frankfurt-based bank is holding its shareholders meeting Friday, where it will be asking for approval of plans to raise euro8.25 billion through new shares to repay much of the state aid it received during the financial crisis.

Last month, the bank announced plans to repay euro14.3 billion in aid from the German government by June partly by issuing new shares, saying it aims to return most of the money it received at the height of the financial crisis.

However, it said that once the state's "silent participation," or non-voting holding, is repaid, the government bank rescue fund will still be left with a regular 25 percent stake in Commerzbank.

Commerzbank released basic earnings figures Monday.

Net profit was up in the first quarter to euro985 million as it cut the number of bad loans and strengthened its financial cushion against investment losses. The profit figure represented a 39 percent improvement on last year's euro708 million.

Gross revenues were about the same at euro3.6 billion.

The bank says it reduced bad loans by more than half and cut back on risky investments. It cut risk-weighted assets _ the securities and other investments against which capital reserves must be held in case of losses, adjusted for their level of risk _ to euro19 billion to euro248 billion.

Its core tier 1 capital ratio, a key measure of financial strength, was about 11 percent. That was an improvement from 10 percent at the end of last year.