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(Bloomberg) — The German government plans to cut its stake in Commerzbank AG as it seizes on a recent share rally to initiate an exit from the lender it rescued over a decade ago.
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The country’s finance agency, which manages the stake of about 16.5%, announced the move after market close on Tuesday. It didn’t disclose how much it would sell or when. The government stake is worth roughly €2.5 billion.
Like other European lenders, Commerzbank has reaped the gains from the European Central Bank’s series of interest rate hikes which began in 2022. The share price is up around 20% this year, having hit the highest level in more than a decade in May.
“The bank’s economic situation has steadily improved,” Finance Agency head Eva Grunwald said in a release. “The federal government is responding to this positive development by reducing its stake in Commerzbank and beginning the exit.”
The state doesn’t intend to sell its entire holding for now, according to people familiar with the matter, who declined to be identified because the process is private.
The tailwind for the banking industry is set to recede as the ECB is widely expected to cut rates for a second time this year when it meets for a policy decision next week. In addition, Germany’s struggling economy has raised the risk of rising corporate defaults, potentially forcing lenders to increase risk provisions.
Germany joins other European countries including Italy, the Netherlands and Greece in selling down stakes in banks they acquired during the financial crisis. The industry across the region has been lifted by the higher rates.
The government has been mulling a sale of its Commerzbank stake for some time, with Bloomberg reporting two years ago it was waiting for the stock to continue rising. It was trading at about €8 per share at the time, compared with roughly €13 at present.
Commerzbank is an important source of credit for Germany’s economy and it has a focus on providing funding for its exporting companies.
The German government’s 16.5% stake makes it Commerzbank’s largest shareholder. The next biggest investor is BlackRock Inc. with about 7%, according to data compiled by Bloomberg.
“The federal government’s entry into Commerzbank in 2008 and 2009 was important in order to protect financial market stability in the midst of the banking crisis,” German Deputy Finance Minister Florian Toncar said in the release. “The reduction of the federal government’s stake in Commerzbank is a sign of the strength of Commerzbank and of Germany as a financial center.”
–With assistance from Zoe Schneeweiss, Kamil Kowalcze and Michael Nienaber.
(Updates with details on government stance in fifth paragraph.)
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