Reuters: Hot Stocks: UPDATE 1-German govt's Commerzbank stake to fall below 20 percent

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UPDATE 1-German govt's Commerzbank stake to fall below 20 percent Mar 13th 2013, 11:57 Wed Mar 13, 2013 7:57am EDT * Commerzbank to repay 1.6 bln eur German govt bailout * Core Tier One capital ratio to improve to 8.6 pct * Shares down 9 percent (Adds detail, background) By Arno Schuetze and Edward Taylor FRANKFURT, March 13 (Reuters) - The German government will cut its stake in bailed-out lender Commerzbank AG to less than 20 percent from 25 percent as part of a raft of measures to strengthen its capital and comply with new bank rules. The country's second-biggest lender said on Wednesday it would raise 2.5 billion euros ($3.3 billion) to repay the German government part of the bail-out money it received during the financial crisis. The measures will increase Commerzbank's capital ratio to 8.6 percent and put it within reach of bank regulators' 2019 target of 9 percent. Earlier this year, Commerzbank had said it would take two to three years to get to that level from the current 7.6 percent. European banks are struggling to meet new bank rules that force lenders to hold more capital to absorb potential future losses. The global roll-out of Basel III rules began in January and gives banks six years to firm up their capital cushions. In the wake of the Lehman failure, the German government took a 25 percent stake in Commerzbank and injected 16.4 billion euros worth of non-voting debt-equity hybrid instruments, known as silent participation, to avoid ending up with a stake of around 80 percent. The move saved the lender from potential failure after a merger with Dresdner Bank in 2008 which turned sour. Commerzbank repaid all but 1.6 billion euros of the silent participations with a raft of capital measures worth 14.3 billion euro in 2011. As part of the plan announced on Wednesday, Commerzbank will repay Germany's bank bailout fund Soffin a remaining 1.6 billion euro tranche of silent participation. Separately, the bank will repay a silent participation worth 750 million euros held by Allianz SE which the insurer took in the wake of Commerzbank's takeover of Dresdner Bank from Allianz in 2008. "The redemption of the silent participation and the reduction of the share stake mark the start of the (government) exit at Commerzbank," said Soffin head Christopher Pleister. ($1 = 0.7680 euros) (Editing by David Holmes) Link this Share this Digg this Email Reprints

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