Bund ceases to hold any more Commerzbank equities
The German government opts to retain its Commerzbank shares, consolidating its current shareholding that recently saw a decrease from 16.5% to 12%. Following the partial sale of shares, further sales will be halted temporarily, as acknowledged by the German Finance Agency in an evening announcement. This decision was a consensus reached by the steering committee of the Financial Market Stabilization Fund (FMS) during their meeting on Friday.
Germany's stake in Commerzbank is held through the FMS. Their recent reduction in shares was announced last week. Approximately 53 million shares were initially put up for sale by the Finance Agency. However, in a recent statement, the Finance Agency noted that "Commerzbank is a financially secure and profitable organization. Its focus is on maintaining independence, a goal the government will continue to support by retaining its stake."
Commerzbank endured financial strife during the 2008 economic crisis and secured a capital aid worth €18.2 billion between 2008 and 2009. As of now, €13.15 billion of this aid has been repaid. The federal government's decision to abstain from participating in several Commerzbank share buyback programs led to a slight increase in their stake in the bank. The bank reported its highest annual profit in 15 years in 2022, with consolidated profits soaring by 55% to €2.2 billion compared to the previous year. Additionally, the bank's revenue increased by more than 10% to €10.5 billion.
DAX Drops After Reaching Record High
While lower interest rates present a promising outlook, German financial experts caution against excessive enthusiasm. Last Wednesday, the US Federal Reserve initiated a 50 basis point cut in interest rates, driving the DAX to a new all-time high and escaping the uncertainty preceding the rate decision. This development not only improved short-term prospects but also boosted the likelihood of a robust fourth quarter. However, on Friday, the DAX experienced a decline: it closed 1.49% lower, at 18,720.01 points.
Despite the positive signals, there are reasons to avoid overenthusiasm. Firstly, the already-high price levels have already factored in the anticipated interest rate reductions. Secondly, the highly-attractive investment opportunities in bond markets, which have been historically low in interest for years, could potentially draw a portion of investors' assets.
The German government's decision to retain its stake in Commerzbank, despite the recent decrease, signals its confidence in the bank's financial security and profitability. The current economic climate, with the DAX reaching a record high, offers promising opportunities for German businesses like Commerzbank.
