Germany plans to reduce stake in Commerzbank as stability restored

Germany intends to reduce its stake in Commerzbank AG as the lender is stable again years after its rescue in the global financial crisis, the government said on Tuesday.

"The bank's economic situation has steadily improved since 2021. The federal government is responding to this positive development by reducing its stake in Commerzbank and beginning the exit," said Eva Grunwald, managing director of the finance agency.

The state holds a 16.5 per cent stake in the German firm worth about 2.6 billion euros ($2.87 billion) through its national bank rescue fund. The government did not specify by how much it would reduce its stake, nor how it would sell the shares.

"The exact procedure, the volume and also the timing are still being determined in view of the market environment", said a spokeswoman for the Finance Agency that handles the government's capital market activities. Commerzbank CBKG.F shares fell in afterhours trading in Frankfurt, and were down 3.4 per cent on the news.

Since the bailout, Commerzbank has undergone a major overhaul, exiting businesses and slashing its workforce and branch network to restore profit. The bank posted its biggest profit in 15 years in 2023 as it benefited from higher interest rates.

Still, the bank's leadership last month signalled economic headwinds in its home market as loan loss provisions were higher than expected.

Shares have dropped 17 per cent since hitting a 12-year high earlier this year. An interministerial committee will decide on further steps in due course, according to the statement.

Germany, which still faces a loss on its Commerzbank investment, increased its stake in the lender earlier this year.

The bank in the past has been a potential merger partner for its bigger domestic peer, Deutsche Bank AG, with which it held talks to combine in 2019.