German group seeks pounds 200m in rights issue

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COMMERZBANK, one of the big three German commercial banks, is returning to the equity capital markets for the first time since 1986 with a DM500m ( pounds 200m) rights issue to shareholders.

The capital increase 'will provide flexibility for future growth,' a Commerzbank spokesman said, adding that the issue would also improve Commerzbank's solvency ratios to cope with tough new standards for capital.

Commerzbank is the weakest of the big three. Lending growth at the moment is sluggish, but Commerzbank is among a number of international banks concerned to boost capital to allow them to grow when recovery comes.

Further rights issues are expected as market conditions allow. Commerzbank received shareholder approval last May to issue shares with a face value of DM400m, compared with the DM125m nominal value of the current issue.

The calculated value of the subscription rights, based on the current stock price, is about DM3 each, the bank said.

Commerzbank shares closed down DM1.90 at DM241.10 and were unchanged from the official close in after-hours trading. The one-for-11 issue of 2.5 million shares is priced at DM200 per share. Shareholders are entitled to take up the issue from 20 January to 3 February, a spokesman said.