Commerzbank AG — Capital/Financing Update 2011

Apr 6, 2011

News Details

Corporate | 6 April 2011 07:26

Commerzbank AG

Commerzbank AG / Key word(s): Corporate Action/Capital Increase

06.04.2011 / 07:26

THIS PRESS RELEASE AND THE INFORMATION CONTAINED HEREIN ARE NOT BEING

ISSUED AND MAY NOT BE DISTRIBUTED IN THE UNITED STATES OF AMERICA, CANADA,

JAPAN OR AUSTRALIA.

Commerzbank intends to largely reduce the silent participations of SoFFin

– Redemption of some EUR 14.3 bn of the SoFFin silent participations of EUR

16.2 bn until June 2011

– EUR 11.0 bn from capital increases, an additional EUR 3.27 bn from own

funds

– Conditional Mandatory Exchangeable Notes (first step), capital increase

with subscription rights (second step)

– SoFFin stake after completion of the capital measure unchanged at 25 %

plus 1 share

– Core Tier 1 ratio after redemption 8.8 %, Equity Tier 1 ratio 8.0 % (on a

pro forma basis)

Commerzbank plans to reduce the silent participations of the Financial

Market Stabilization Fund (SoFFin) totalling EUR 16.2 billion by around EUR

14.3 billion until June 2011, and thus to repay them to a large extent. A

package for corporate action is foreseen which aims to attract new

investors, safeguard the interests of the current shareholders, and

guarantee the greatest-possible transaction certainty.

As a first step, Conditional Mandatory Exchangeable Notes (CoMEN) are to be

placed through a book building process from April 6, 2011 onwards. After

the occurrence of certain conditions, the CoMEN are to be exchanged for

Commerzbank shares following the Annual General Meeting (AGM) in May 2011.

The new shares necessary are to be created from new conditional capital

through the conversion of silent participations of SoFFin. In return,

SoFFin will receive the gross proceeds from the placement of the CoMEN. In

order to maintain its shareholding of 25% plus 1 share SoFFin will then

convert additional silent participations into shares. The ordinary AGM of

Commerzbank, which has been brought forward from May 18, 2011 to May 6,

2011, is to pass a resolution on the creation of the required conditional

capital.

As a second step, a capital increase with subscription rights is foreseen.

It is to be executed from the end of May to the beginning of June 2011. To

maintain its shareholding of 25% plus 1 share, SoFFin is contributing

silent participations. The resolution required for the capital increase is

also to be passed by the AGM. Some EUR 8.25 billion are to be raised from

the capital markets in the framework of the transaction. In addition,

silent participations of SoFFin to a total of some EUR 2.75 billion will be

converted into Commerzbank shares (first step) or will be contributed to

the rights issue (second step). In total, SoFFin silent participations of

around EUR 11.0 billion are to be redeemed and replaced by the corporate

action to the same amount with Equity Tier 1 capital. Additional SoFFin

silent participations to the amount of EUR 3.27 billion are to be redeemed

from excess regulatory capital.

An international syndicate of banks has undertaken to underwrite the

targeted volume from the capital markets of some EUR 8.25 billion at

customary market conditions; this presupposes that SoFFin participates in

the overall transaction as planned. The syndicate will be lead by the

global coordinators Commerzbank, Deutsche Bank, J.P.Morgan and Citi. Other

joint bookrunners are Goldman Sachs, HSBC, ING and UBS.

‘The government reacted courageously and quickly following the Lehman

collapse: It stabilised the banking system and granted interim support. For

this it deserves our respect and thanks,’ said Martin Blessing, Chairman of

the Board of Managing Directors of Commerzbank. ‘We have returned to

profitability one year earlier than expected, and we are also implementing

the integration of Dresdner Bank in important areas more quickly than

planned. Our business model bears fruit. This gives us the possibility to

redeem the silent participations ahead of schedule and pay off around 90 %

in one transaction. We intend to repay the then remaining sum of about EUR

1.9 billion from future excess regulatory capital by 2014 the latest,’ said

Blessing. ‘We are keeping our promise of repaying the temporary assistance

from the German government as quickly as possible. The taxpayer is also not

to suffer any loss.’ In connection with the redemption of the silent

participations, SoFFin is receiving a one-off payment of EUR 1.03 billion.

Placement of the CoMEN

In a first step, from April 6, 2011 onwards CoMEN totalling from some EUR

2.6 billion to around EUR 3.4 billion are to be placed with national and

international investors by an international syndicate of banks using a book

building process. Investors, who hold Commerzbank shares on April 6, 2011

(close of markets) are granted purchase rights; this means they can

purchase one CoMEN for each share. The purchase period begins on April 7,

2011. SoFFin does not have purchase rights. In order to maintain its stake

of 25% plus 1 share and depending on the volume of the transaction,

however, SoFFin will convert additional silent participations in the amount

of about EUR 0.9 billion to some EUR 1.1 billion into Commerzbank shares.

The bank is endeavouring to place a total of some EUR 3.5 billion to around

EUR 4.5 billion in the first step, but a maximum size of EUR 6.0 billion.

The purchase price for the CoMEN is the same for existing shareholders and

investors participating in the book building and will be determined in the

book building process.

The number of CoMEN to be issued and their purchase price will be fixed

after the end of the book building (April 13, 2011) and annouced

immediately thereafter in an ad hoc release. Each CoMEN, subject to the

occurrence of certain conditions – in particular the adoption and

implementation of the necessary resolutions by the AGM – is to be exchanged

for one Commerzbank share carrying full dividend rights from January 1,

2011 onwards. This is planned for the 19th calendar week 2011. The new

shares necessary are to be created in May 2011 from conditional capital to

be created by the AGM through the conversion of silent participations of

SoFFin. In return, SoFFin is to receive the gross proceeds from the

placement of the CoMEN.

Capital increase with subscription rights

As a second step a capital increase with subscription rights is foreseen.

The shares delivered in exchange for CoMEN in the first step are also

entitled to subscription rights. The size of the capital increase is

determined to achieve a reduction of the silent participations in a total

of EUR 11.0 billion. The corresponding resolution on the capital increase

is to be passed by the AGM on May 6, 2011. The new shares are to be offered

to the shareholders for subscription from the end of May 2011 to the

beginning of June 2011. The subscription ratio will depend on the final

number of shares on offer. The subscription price is to be determined based

on a discount on the market price on the day it is determined. The Board of

Managing Directors of Commerzbank is to decide on the number of shares to

be issued and further details of the capital increase with the consent of

the Supervisory Board. The new shares to be issued in the second step are

likewise to be endowed with full dividend rights from January 1, 2011

onwards. It is foreseen that SoFFin will participate in the capital

increase by contributing silent participations to maintain its current

shareholding of 25% plus 1 share. Allianz has expressed its intention to

exercise its subscription rights in the second step in considerable size.

Annual General Meeting brought forward to May 6, 2011

At the AGM, which has been brought forward from May 18, 2011 to May 6,

2011, the Board of Managing Directors and Supervisory Board of Commerzbank

will propose that the necessary resolutions for the implementation of the

overall transaction be passed. In this respect it will also be proposed to

the AGM that the arithmetic value of each share as a proportion of the

capital stock be reclassified. In this respect, EUR 2.1 billion of the

subscribed capital (totalling EUR 3.5 billion) stated on Commerzbank AG’s

financial statement according to German GAAP as of December 31, 2010 are to

be transferred into the capital reserve. This balance sheet measure does

not have any effect on the amount of the equity capital or the number of

shares issued. Commerzbank shares do not have a notional value. The

reclassification, therefore, merely leads to the arithmetical portion of a

share in the subscribed capital being reduced from EUR 2.60 to EUR 1.00.

The full agenda of the AGM, which also includes the precise wording of the

proposed resolutions for both steps, will be published on April 8, 2011.

Repayment from excess regulatory capital

Against the background of its customer-centric and performing business

model, and with a view to its comfortable capital resources, Commerzbank is

redeeming silent participations of SoFFin to the amount of EUR 3.27 billion

from excess regulatory capital in the framework of the overall transaction.

The necessary approvals have been granted. As of December 31, 2010 the Core

Tier 1 capital of Commerzbank amounted to some EUR 26.7 billion, the Core

Tier 1 ratio was 10.0%. After the completion of the entire transaction the

Core Tier 1 capital of the bank – taking into account the SoFFin one-off

payment (EUR 1.03 billion), the transaction costs and the capital increase

from January 2011 – will amount to some EUR 23.5 billion; the Core Tier 1

ratio will be 8.8%, the Equity Tier 1 ratio 8.0% (on a pro forma basis as

of December 31, 2010). Together with the measures from the first and second

step, which will reduce the silent participations by EUR 11.0 billion, the

silent participations of SoFFin can thus be reduced by a total of some EUR

14.3 billion.

Outlook: first quarter of 2011 above plan

‘Since the beginning of 2011 we have already completed several successful

capital market transactions to optimise our capital structure. In just six

weeks we have raised equity that meets the Basel III guidelines of

considerably more than EUR 3 billion. With the implementation of the

announced corporate action we will further strengthen our Equity Tier 1

capital. Thus, we are well prepared for Basel III requirements,’ said

Martin Blessing. ‘Investors know what Commerzbank has to offer them: We are

leading in the business with small- and medium-sized companies. We have

great potential in private customer business, and in the framework of the

Dresdner Bank integration we intend to attain annual synergies totalling

EUR 2.4 billion after 2013,’ said CFO Eric Strutz.

On the whole the bank expects, on the basis of preliminary figures for the

first quarter of 2011, an operating profit above plan. January and February

were particularly positive in the Private Customers and Mittelstandsbank

segments. Corporates & Markets also displayed a good development; on the

whole, however, the performance was somewhat weaker than the very strong

respective quarter in the previous year. Loan loss provisions in the group

also saw a further decrease. The bank assumes – with a stable market

environment and without taking into account the SoFFin one-off payment –

that it will conclude 2011 with an operating profit according to IFRS that

is higher than in 2010. The one-off payment to SoFFin will already be

accounted for in the second quarter of 2011.

‘Our ‘Roadmap 2012’ objective of achieving an operating profit of more than

four billion euros in 2012 in a stable market environment and without

taking into account the impact of regulatory changes remains unchanged,’

said Blessing. From its present stance, Commerzbank assumes that it will be

able to distribute a dividend for the 2012 financial year. ‘For the period

thereafter Commerzbank also has ambitious goals. We will not content

ourselves with achieving the ‘Roadmap 2012’. On the contrary: We intend to

bring about a clear increase in profit subsequently.’

Press contact:

Richard Lips +49 69 136 22461

Armin Guhl +49 69 136 42764

Reiner Roßmann +49 69 136 46646

*****

Press Conference

A press conference will be held today, Wednesday, April 6, 2011 at 10:30

a.m. (CEST) in the 49th floor of Commerzbank AG, Kaiserplatz, Frankfurt am

Main. During the press conference, Martin Blessing and Eric Strutz will

comment on the planned measures to redeem the SoFFin silent participations.

Before the beginning of the press conference presentations will be provided

on the website of Commerzbank. The conference will be transmitted live via

internet.

*****

About Commerzbank

Commerzbank is a leading bank for private and corporate customers in

Germany. With the segments Private Clients, Mittelstandsbank, Corporates &

Markets, Central & Eastern Europe as well as Asset Based Finance, the Bank

offers its customers an attractive product portfolio, and is a strong

partner for the export-oriented SME sector in Germany and worldwide. With a

future total of some 1,200 branches, Commerzbank has one of the densest

networks of branches among German private banks. It has around 60 sites in

50 countries and serves approximately 14 million private clients as well as

one million business and corporate clients worldwide. In 2010 it posted

gross revenues of EUR 12.7 billion with some 59,100 employees.

*****

Disclaimer

The information contained herein serves information purposes and does not

constitute a prospectus or any offer for sale or subscription of or

solicitation or invitation of any offer to buy or subscribe for any

securities for the purposes of EU Directive 2003/71/EC. Securities will

solely be offered on the basis of a prospectus or other offering circular

to be issued by the company in connection with such offering. Subject to

approval by the German Federal Financial Services Supervisory Authority, a

prospectus will be available free of charge from Commerzbank AG

(Kaiserstraße 16 (Kaiserplatz), 60311 Frankfurt am Main) and on the website

of Commerzbank AG under www.commerzbank.com. The securities will be offered

exclusively on the basis of the prospectus required to be approved by the

Federal Financial Services Supervisory Authority.

This release does not constitute an offer to sell securities, or a

solicitation of an offer to buy securities, in the United States of

America. Securities may not be offered or sold in the United States of

America absent registration or an exemption from registration under the

U.S. Securities Act of 1933, as amended (the ‘Securities Act’). The

securities of Commerzbank AG described herein have not been and will not be

registered under the Securities Act, or the laws of any State, and may not

be offered or sold within the United States, except pursuant to an

exemption from, or in a transaction not subject to, the registration

requirements of the Securities Act and applicable State laws. Commerzbank

AG does not intend to register any portion of the offering in the United

States or conduct a public offering of securities in the United States.

This release is for information purposes only and does not constitute an

offer document or an offer of transferable securities to the public in the

U.K. to which section 85 of the Financial Services and Markets Act 2000 of

the U.K. (‘FSMA’) applies and should not be considered as a recommendation

that any person should subscribe for or purchase any of the Securities.

The Securities will not be offered or sold to any person in the U.K. except

in circumstances which have not resulted and will not result in an offer to

the public in the U.K. in contravention of section 85(1) of FSMA. The

communication of this document is restricted by law; it is not intended for

distribution to, or use by any person in, any jurisdiction where such

distribution or use would be contrary to local law or regulation. This

document is not being distributed by, nor has it been approved for the

purposes of section 21 of FSMA by, a person authorised under FSMA. This

document is being communicated only at (I) persons who are outside the

United Kingdom (II) to in-vestment professionals falling within Article

19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)

Order 2005, as amended (the ‘Order’) or (III) high net worth companies and

other persons within the categories described in Article 49(2)(a) to (d) of

the Order (all such persons together being referred to as ‘Relevant

Persons’). Any person who is not a Relevant Person should not act or rely

on this [document] or any of its contents. The Securities are available

only to, and any invitation, offer or agreement to purchase will be engaged

in only with Relevant Persons. Persons in possession of this document are

required to inform themselves of any relevant restrictions. No part of this

document should be published, reproduced, distributed or otherwise made

available in whole or in part to any other person without the prior written

consent of Commerzbank AG (Stabilization/Regulation (EC) 2273/2003).

This release contains statements concerning the expected future business of

Commerzbank, efficiency gains and expected synergies, expected growth

prospects and other opportunities for an increase in value of the company

as well as expected future net income per share, restructuring costs and

other financial developments and information. These forward-looking

statements are based on management’s current expectations, estimates and

projections. They are subject to a number of assumptions and involve known

and unknown risks, uncertainties and other factors that may cause actual

results and developments to differ materially from any future results and

developments expressed or implied by such forward-looking statements.

Commerzbank has no obligation to periodically update or release any

revisions to the forward-looking statements contained in this release to

reflect events or circumstances after the date of this release.

End of Corporate News

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Language: English

Company: Commerzbank AG

         Kaiserplatz

         60261 Frankfurt am Main

         Deutschland

Phone: +49 (069) 136 20

Fax: –

E-mail: ir@commerzbank.com

Internet: www.commerzbank.de

ISIN: DE0008032004

WKN: 803200

Listed: Regulierter Markt in Berlin, Düsseldorf, Frankfurt (Prime

         Standard), Hamburg, Hannover, München, SIX, Stuttgart;

         Terminbörse EUREX; London

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