The FINANCIAL — According to Dow Jones, German banks January 21 flagged additional write-downs for the fourth quarter, sending financial services sector shares sharply lower in midday trade.
Commerzbank confirmed comments made by the incoming Chief Executive Martin Blessing that the bank still expects to make further write-downs on its exposures to subprime and related securities.
In November, Chief Financial Officer Eric Strutz said the write-downs made in the second and third quarter, of EUR46 million and EUR291 million, respectively, weren't definitive and said it depended on the market development.
A spokesman also confirmed on January 21 that Commerzbank's Blessing expects the fourth-quarter write-downs to be lower than those made in the preceding quarter.
At 1208 GMT, the bank's shares were down EUR1.16, or 5.5%, at EUR20. The DAX 30 index of German blue chips was off 6.7%.
To add insult to injury, Iceland's investment company FL Group (FL.IC) said it had divested some of its stake in Commerzbank and that it now holds 1.15%. This is the second time in a week that the company has cut its investment.
The company said the move was in line with the strategy to decrease its exposure to equity markets.
Nevertheless, the disposal sends a strong signal to Commerzbank. As recently as upon presenting third-quarter results to investors in London in early November, FL Group said that the Commerzbank stake was strategic and that it would like to raise it.
Meanwhile, German state-owned wholesale bank WestLB AG also said on January 21 that it would make a EUR1 billion write-down on its exposures.
The news from the two banks followed a slew of negative statements about exposure to subprime and complex credit securities, from foreign banks, as well as from Munich-based Hypo Real Estate AG (HRX.XE) last week, and weighed heavily on the sector.
Deutsche Bank AG (DB) was down 7.2% at EUR72.7, Hypo Real Estate AG (HRX.XE) was off 8.7% to EUR20.1, IKB Deutsche Industriebank AG (IKB.XE) – Germany's most high-profile victim to subprime – was down 5.6% at EUR5.10, Aareal Bank AG (ARL.XE) was down 6.9% at EUR22.81 and Deutsche Postbank AG (DPB.XE) was off 5.2% to EUR54.
Allianz SE (AZ), owner of Dresdner Bank AG, was down 9.1% at EUR120.9.
UniCredit SpA (UC.MI), meanwhile, which is heavily exposed to the German market through its subsidiary in Munich, HVB Group, was down 3.9% at EUR5.1.
