Commerzbank Shares Rocked; Capital Rescue Coming

Germany is taking a stake of 25 percent plus one share in Commerzbank in return for an additional 10 billion euro ($13.6 billion) capital injection into the bank, Commerzbank said on Thursday.

Commerzbank and German insurer Allianz also said they expect Commerzbank to complete its 5 billion euro takeover of Allianz's Dresdner Bank within days.

The government's capital injection will raise the core capital ratio of the merged bank to 10 percent, Germany's second-biggest listed bank said.

"We are weatherproofing our bank for an economically stormy environment," Chief Executive Martin Blessing said in a statement.

Analysts have said Commerzbank needed to shore up its core capital ahead of its takeover of Dresdner, which has been making losses for more than a year.

The deal gives the government a blocking minority in the country's No. 2 lender behind Deutsche Bank.

Earlier on Thursday, Commerzbank's shares fell by a fifth in value to an all-time low on reports of the looming capital injection by the government financial sector rescue fund Soffin.

Commerzbank stock closed 13.8 percent lower at 5.25 euros. Allianz shares fell 5.4 percent to 66.7 euros.

One trader said while the news was weighing on the bank's stock, Commerzbank's takeover of Dresdner was now "financially secure".

Allianz has agreed to bolster Dresdner Bank's capital by 1.45 billion euros as part of the deal, the companies said.

Soffin had already agreed to an 8.2 billion euro capital injection for Commerzbank last year, making it Germany's first commercial lender to turn to the government for help in the wake of the financial market crisis.

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