CBK.DE - Commerzbank AG

XETRA - XETRA Delayed price. Currency in EUR
5.87
-0.20 (-3.28%)
At close: 5:35PM CEST
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Previous close6.07
Open5.97
Bid5.88 x 200000
Ask5.89 x 110000
Day's range5.82 - 6.06
52-week range4.66 - 9.66
Volume9,503,090
Avg. volume8,014,263
Market cap7.35B
Beta (3Y monthly)1.88
PE ratio (TTM)10.17
EPS (TTM)0.58
Earnings date7 Nov 2019
Forward dividend & yieldN/A (N/A)
Ex-dividend date2019-05-23
1y target est11.78
  • PR Newswire

    COMMERZBANK AG - Post-stabilisation Commerzbank € 500mn snp due 2024

    Post-stabilisation notice 16 September 2019 Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful. Commerzbank AG 0.25 ...

  • PR Newswire

    COMMERZBANK AG - Pre-stabilisation Banco de Sabadell € 5.5yr senior np

    Pre-Stabilisation notice 16 September 2019 Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful. Banco Sabadell, S.A. ...

  • Bloomberg

    Draghi Kicks Banks Where It Really Hurts

    (Bloomberg Opinion) -- Mario Draghi’s public scolding of Europe’s lenders this week matters more than what he did for them.Banks in the region have long complained of the squeeze negative interest rates are putting on their profits — upending their traditional business model of borrowing money for the short term to lend to clients in the long run. But there’s little they can do to ease the pain: Charging ordinary citizens to hold their deposits, for example, is controversial and may even be illegal. As he cut rates deeper into negative territory this week, the president of the European Central Bank showed that he had listened to these complaints, announcing a package of measures to spare banks some of the pain of negative rates. But he accompanied this with a blunt message: Banks need to get their own houses in order.While there’s a growing acceptance that the industry will be hurt by a prolonged spell of low rates, there’s a danger that this becomes an excuse for executives to shrug their shoulders and accept that returns won’t improve. That’s wrong.Draghi didn’t mince his words on what bank executives could be doing instead of venting their anger. Costs at some European banks are “completely way off,” he said, without identifying any individual firm. And banks should be investing more in technology. He’s right on both counts.While there’s significant divergence between lenders, expenses ate up more than 70% of revenue at some of France’s biggest banks last year, and even more at their German counterparts — levels that are not sustainable. Deutsche Bank AG’s latest (and long overdue) turnaround effort should see its cost-income ratio finally fall to a more sustainable 70% in three years from closer to 94% last year. Yet Chief Executive Officer Christian Sewing has been among the most vocal on the consequences of negative rates.France’s Societe Generale SA is studying ways to save a further 600 million euros at its Paris operations. Italy’s UniCredit SpA is considering a further 10,000 job cuts. More than a decade after the financial crisis, banks — when pushed — still seem to be able to find excess capacity to cut.Draghi also had some advice for what should be getting executives more excited: technology. Hampered by old, often overlapping, systems that continue to soak up expenses, lenders have been slow to jump on the digitization bandwagon.They have also found themselves at the center of money-laundering scandals that are costing them in fines. Technology can help them: Dutch banks are teaming up to build algorithms to prevent the flow of illicit funds, a move other lenders could copy.To be sure, investing in technology and cutting fat comes with upfront costs that could further erode short-term profit, hurting investors. Labor opposition has also proven difficult to overcome. When Deutsche Bank and Commerzbank AG weighed a merger earlier this year, unions made it very clear they weren’t in favor of the tens of thousands of job cuts that would have been needed.But this medicine is necessary — for the sake of all of us. We may be approaching a level at which the industry’s meager profitability forces some European lenders to scale back, a problem in a region where companies still rely on bank lending rather than the bond market for the bulk of their borrowings. Short-term loans show signs of weakness, Draghi warned on Thursday. That’s a worrying prospect.The departing president’s latest message could not have been clearer. Industry leaders should listen.To contact the author of this story: Elisa Martinuzzi at emartinuzzi@bloomberg.netTo contact the editor responsible for this story: Stephanie Baker at stebaker@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Prosecutors raid Commerzbank offices over share-trading scam
    Reuters

    Prosecutors raid Commerzbank offices over share-trading scam

    Prosecutors on Tuesday raided offices of Germany's Commerzbank as part of a broader investigation into a fraudulent share-trading scheme, the Cologne public prosecutor's office said. Prosecutors have said the practice misled the German government into paying tax refunds that have cost the country more than 5 billion euros (4.47 billion pounds). Earlier this month the first trial began as part of a wider investigation into the scheme, aimed at recovering billions from banks who profited.

  • PR Newswire

    COMMERZBANK AG - Pre-stab Commerzbank € non-preferred senior due 2024

    Pre-Stabilisation notice 9 September 2019 Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful. Commerzbank AG € 500,000,000 ...

  • Oil Posts Biggest Weekly Gain Since July on U.S. Fed Reassurance
    Bloomberg

    Oil Posts Biggest Weekly Gain Since July on U.S. Fed Reassurance

    (Bloomberg) -- Oil posted the biggest weekly gain since July as Federal Reserve Chairman Jerome Powell sought to calm fears of a possible recession following a lackluster jobs report that was seen as dimming the demand outlook.Futures in New York rose 0.4% Friday, erasing earlier losses. Powell said the most likely outlook for the U.S. and world economy is continued moderate growth, but the central bank was monitoring “significant risks.” The market also drew support from a U.S. report that showed the rig count had declined for the third week, implying a slowdown in domestic oil production.“The oil market and equities market are reacting positively to remarks by Powell that the Fed is not expecting or forecasting a recession,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.The U.S. Labor Department on Friday reported that employers added 130,000 new jobs in August, somewhat undershooting economists’ estimates and adding to fears of a weakening economy. Compounding demand worries, the tit-for-tat tariff war between the world’s top two economies worsened, and China moved to cut its reserve requirement.The market also unraveled gains that were driven by a bullish U.S. petroleum inventory report Thursday which showed weekly stocks in crude and major fuels had declined nearly 10 million barrels.See also: EIA Stockpiles Drop on Driving Season’s Last Hurrah: Julian LeeWest Texas Intermediate oil for October delivery gained 22 cents to settle at $56.52 a barrel on the New York Mercantile Exchange. It was up 2.6% for the week. Gasoline’s spread to crude, also known as the gasoline crack, rose as much as 11% for the largest weekly gain since July as gasoline futures strengthened.Brent for November rose 59 cents to settle at $61.54 a barrel on the ICE Futures Europe Exchange, ending the week up 1.8%. The global benchmark traded at a $5.11 premium to WTI for the same month.\--With assistance from Grant Smith.To contact the reporter on this story: Sheela Tobben in New York at vtobben@bloomberg.netTo contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Mike JeffersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • China Ratchets Up Stimulus, Cutting Reserve Ratio to Lowest Level Since 2007
    Bloomberg

    China Ratchets Up Stimulus, Cutting Reserve Ratio to Lowest Level Since 2007

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. China’s central bank said it will cut the amount of cash banks must hold as reserves to the lowest level since 2007, injecting liquidity into an economy facing both a domestic slowdown and trade-war headwinds.The required reserve ratio for all banks will be lowered by 0.5 percentage points, taking effect on Sept. 16, the People’s Bank of China said on its website Friday. The PBOC also cut the reserve ratios by one percentage point for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15.The cuts will release 900 billion yuan ($126 billion) of liquidity, the PBOC said, helping to offset the tightening impact of upcoming tax payments. That is more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC said at those times.The shift is aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. While limited, it could also put pressure on the already weakening yuan which may antagonize President Donald Trump. PBOC officials indicated recently they are wary of larger-scale easing measures, and have so far refrained from following the U.S. Federal Reserve in cutting benchmark interest rates.The cut “doesn’t reflect an aggressive easing,” said Zhou Hao, a senior emerging markets economist at Commerzbank AG in Singapore. “In fact, China has recently massively tightened property financing. Hence this is still a re-balancing -- to lower the funding costs for the manufacturing sector but tighten liquidity in the property sector due to asset bubble concerns.”The Stoxx Europe 600 Index and S&P 500 futures extended gains after the announcement. The offshore yuan gained 0.35% to 7.1128 a dollar as of 6:30 p.m. in Beijing.China’s economy softened again in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator.What Bloomberg’s Economists Say..“The PBOC has also gained more room for monetary easing, as the spread between U.S. and China 10-year government bond yields hovers near its highest level since 2018. The depreciation of the yuan also gives the PBOC more flexibility in performing monetary policy.”David Qu, Bloomberg EconomicsTo read the full note click hereThe central bank emphasized that the policy change wasn’t a massive step up in easing.“The cut is not flooding the economy with stimulus and the stance of prudent policy has not changed,” it said in a separate statement. The RRR cut will offset the tax season in mid-September, and the overall liquidity in the banking system will stay basically stable, according to the PBOC.‘The cuts don’t mean significant easing in monetary policy,” said Ding Shuang, chief China and North Asia economist at Standard Chartered Bank Ltd. in Hong Kong. “Rather it is something they must do, a sort of marginal easing, in order to prevent tightening in monetary policy.”(Updates with comment, more details from the statement.)\--With assistance from Miao Han.To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.netTo contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James MaygerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Oil Closes Little Changed After Late Sell-Off on Demand Woes
    Bloomberg

    Oil Closes Little Changed After Late Sell-Off on Demand Woes

    (Bloomberg) -- Oil closed little changed after rallying to a five-week high earlier in the day as investors re-focused on the uncertain outlook for global demand.Futures in New York earlier rose as much as 2.7% on Thursday. While the U.S. government reported a nearly 5 million-barrel draw in domestic crude inventories, concerns linger that global growth may stall if trade talks between the U.S. and China in October don’t yield a positive result."There is the specter of diminished global demand at a time when U.S. production is still strong," said Gene McGillian, a senior analyst and broker at Tradition Energy in Connecticut. "Uncertainty surrounding global demand from the U.S.-China trade dispute continues to hold the market back."Futures in New York hit a five-week intraday high during the session on reports that the U.S. and China would hold trade talks next month and as the market reacted to depleting inventories in the U.S., with stockpiles at the key Cushing, Oklahoma storage hub at the lowest since December 2018.West Texas Intermediate for October delivery edged higher by 4 cents to settle at $56.30 a barrel on the New York Mercantile Exchange. Brent for November settlement rose 25 cents to end the session st $60.95 a barrel on the ICE Futures Europe Exchange. The global benchmark crude traded at a $4.79 premium to WTI for the same month.The EIA report showed that while U.S. crude stockpiles are at the lowest level in almost a year, crude production is near record-high levels.To contact the reporter on this story: Sheela Tobben in New York at vtobben@bloomberg.netTo contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Jessica Summers, Reg GaleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Danske Bank poaches Commerzbank finance chief in post-scandal shake-up
    Reuters

    Danske Bank poaches Commerzbank finance chief in post-scandal shake-up

    Danske Bank named Stephan Engels from Commerzbank as its finance chief on Thursday, in an ongoing overhaul by the Danish lender's new boss to restore trust after its involvement in a damaging money laundering scandal. Together with shipping firm AP Moller-Maersk and brewer Carlsberg, Danske is part of a powerful axis in Danish business life and has traditionally been led by either Danish or Scandinavian executives. For Commerzbank, the unexpected departure of Engels, its long-time chief financial officer, comes as the German bank is in the middle of a review of its strategy following this year's failed merger talks with Deutsche Bank.

  • Danske Bank hires finance chief from Commerzbank in shake-up
    Reuters

    Danske Bank hires finance chief from Commerzbank in shake-up

    Danske Bank named Stephan Engels from Commerzbank as its finance chief on Thursday, the latest step by the Danish lender's new boss to restore trust after its involvement in a damaging money laundering scandal. For Commerzbank, the unexpected departure of Engels, its long-time chief financial officer, comes as the German bank is in the middle of a review of its strategy following this year's failed merger talks with Deutsche Bank . Commerzbank, Germany's second-largest bank behind Deutsche, is looking at possible staff cuts and closing some branches, sources have told Reuters.

  • German Slump Threatens Bank Profits as Loan Risk Spreads
    Bloomberg

    German Slump Threatens Bank Profits as Loan Risk Spreads

    (Bloomberg) -- Germany’s deepening economic slump is squeezing the life out of the nation’s struggling banks, a little more than a decade after a crippling financial crisis from which many never fully recovered.Lenders ranging from Deutsche Bank AG and Commerzbank AG to HSBC Holdings Plc’s German subsidiary all reported deteriorating second-quarter earnings. They had to set aside more money for loans to companies reeling from the impact of global trade disputes, Brexit uncertainty and distress in the autos sector. All are now doubling down on cost cuts to offset the rising threat to profitability.“Headwinds from interest rates and the economy are intensifying,” HSBC’s Germany head Carola von Schmettow said on Wednesday. There is an “increased danger of credit defaults” in the second half of the year, according to the bank.The growing threat could hardly come at a worse time for a banking industry already debilitated by years of sub-par profitability and failed turnaround plans. Deutsche Bank recently unveiled the most sweeping restructuring plan in its recent history and has since acknowledged that the underlying macro-economic assumptions didn’t factor in the rapidly deteriorating outlook.Commerzbank is working on a strategy update while the world around it slides toward recession. About a third of the lender’s total loan book -- or about a fifth of its total balance sheet -- is pledged to German companies.The pain hasn’t just been felt at publicly-traded banks. State-owned Landesbank Baden-Wuerttemberg, as well as DZ Bank AG, Germany’s largest cooperative lender, also saw loan loss provisions rise in the first half after a benign period a year earlier.Rising risk provisions will be a test case for foreign banks operating in Germany too. HSBC, ING Groep NV, BNP Paribas SA and JPMorgan Chase & Co. have all been boosting lending to German companies in a bid to wrest market share from Germany’s largest corporate lenders on their home turf.ING’s German unit has been particularly active: it’s tripled lending to companies over the past half decade, growing corporate credit to 15% of its balance sheet last year.Intense competition from foreign banks has been one factor driving lax lending standards at some banks, regulators have said, though individual lenders including Commerzbank are keen to say that doesn’t apply to them. Still, some banks including BNP have indicated that they’re willing to lose money on some corporate loans if they can ultimately earn a return by selling the client other products.Almost all the banks are working on deeper cost cuts to cope with the challenge to their profitability. Deutsche Bank’s expense drive is the industry’s most ambitious by far as it rips out large swathes of its securities trading operations and scours its retail division for additional cuts as well, including centralizing its workforce in Frankfurt and closing additional branches, according to people familiar with the matter.The latest set of earnings may only have been the tip of the iceberg. Analysts expect the loan-loss provisions at both Deutsche Bank and Commerzbank to soar over the coming years, posing a growing threat to the banks’ bottom lines, especially if their efforts to stop several years of shrinking revenue continue to fail.The situation is compounded because both lenders are already burning through financial reserves to fund their overhauls. A surge in delinquent loans could bring the banks even closer to their minimum capital requirements -- at a time when raising fresh funds from investors is especially hard given their stock prices are near all-time lows.The outlook for some of Germany’s key industries and in particular the automotive sector is worrisome. Several carmakers and parts suppliers including Daimler AG and Continental AG have issued profit warnings. The insolvency last month of Eisenmann SE, a maker of surface coating machines for car producers, has increased the focus on the sector.This year, Commerzbank increased its expectations of losses from exposure to the automotive industry to the highest in more than four years. The larger part of the second-quarter loan impairments at HSBC came from a small number of big defaults, including within Germany’s automotive industry, according to a person familiar with the matter.“Some of Germany’s banks were struggling already during the boom times and that’s going to get worse in a weaker economy,” said Isabel Schnabel, finance professor at the University of Bonn and a member of Chancellor Angela Merkel’s council of economic advisers. “We’ll see in the downturn whether banks loosened their lending standards too far.”(Adds details about additional cost cuts in tenth paragraph.)\--With assistance from Stephan Kahl.To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net;Steven Arons in Frankfurt at sarons@bloomberg.netTo contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Iain Rogers, Daniel SchaeferFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • PR Newswire

    COMMERZBANK AG - Pre-stabilisation Pbb € 500mn sen.preferred 5yr

    Pre-Stabilisation notice 29 August 2019 Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful. pbb Deutsche Pfandbriefbank ...

  • PR Newswire

    COMMERZBANK AG - Pre-stabilisation Hochtief € dual tranche 8-12 years

    Pre-Stabilisation notice 28 August 2019 Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful. HOCHTIEF Aktiengesellschaft ...

  • Commerzbank Investor Norway Raises Stake After Stock Falls to Record Low
    Bloomberg

    Commerzbank Investor Norway Raises Stake After Stock Falls to Record Low

    (Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.One of Commerzbank AG’s biggest investors, Norway’s $1 trillion sovereign wealth fund, raised its stake in the German lender after the stock fell to a record low.The kingdom held 3.1% of voting rights in the German lender, according to a statement Thursday, pushing it past the threshold at which it must issue an official notification of its stake. The fund previously held about 2.5%, according to data compiled by Bloomberg.Commerzbank slumped to a record low last week as an economic slowdown and the prospect of lower interest rates raise doubts about Chief Executive Officer Martin Zielke turnaround. Zielke is currently working on a strategy update that may include more job cuts and branch closures. The German government, the bank’s largest shareholder with a 15.6% holding, is looking to hire a consultant to help advise it on what to do with the stake.The increase turns the Norwegian wealth fund into Commerbank’s fifth-largest shareholder, according to the data. Shares of the lender rose 1.2% at 11:09 a.m. in Frankfurt.To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.netTo contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian BaumgaertelFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Commerzbank mulls branch closures as part of broader strategy review
    Reuters

    Commerzbank mulls branch closures as part of broader strategy review

    German lender Commerzbank is considering closing some bank branches as it figures out a way forward after its talks to merge with rival Deutsche Bank collapsed earlier this year, people familiar with the matter said on Wednesday. Commerzbank declined to comment.

  • Commerzbank Weighs Deeper Cuts as Economy, Rates Hit Stock
    Bloomberg

    Commerzbank Weighs Deeper Cuts as Economy, Rates Hit Stock

    (Bloomberg) -- Commerzbank AG’s strategy update this fall is likely to focus on deeper job cuts and branch closings as the troubled German lender contends with fears of a recession and a slump in the shares.Chief Executive Officer Martin Zielke, whose three-year-old strategy was based on the prospect of a growing economy and rising interest rates, is examining various cost cutting scenarios, some of which include closing hundreds of branches, according to people familiar with the matter. The weaker economy and prospect of even lower rates -- which erode income from lending -- have pushed Zielke to consider options more severe than anticipated, said the people, asking not to be identified in discussing internal planning.A spokesman for Commerzbank declined to comment.Germany’s economic contraction and global trade tensions have thrown a wrench in Zielke’s plan to pivot Commerzbank away from investment banking and toward consumer and corporate lending in its home market. Government-brokered talks about a takeover by Deutsche Bank AG collapsed in April. Commerzbank shares have erased all gains since Zielke first announced his strategy in 2016 and are trading near a record low.Planning for the strategy update, which will set new targets beyond 2020, hasn’t been finalized and the supervisory board won’t discuss the plan until late September, the people said. But Zielke will probably have to give up his commitment to the bank’s vast branch network in Germany, they said. Handelsblatt earlier reported on the discussion to close branches.The bank has about 1,000 branches in Germany. Headcount has fallen from about 43,300 at the end of 2015 to 40,700 in June this year. Commerzbank earlier this year scrapped a previous target to lower that number to 36,000 by 2020, saying it will stay above 38,000.Additional reductions would probably only happen over time because of the strong position of labor unions in Germany, where they have a say in how companies are run. Many of the cuts the bank has already agreed with unions will only take effect this year and next, Commerzbank has said.The plan to cut branches is a departure from previous and oft-repeated pledges by retail head Michael Mandel not to let the number drop below 1,000. He committed to maintaining the branch network as the centerpiece of a marketing campaign that lampooned other lenders -- including Deutsche Bank -- for shrinking their number of outlets.To boost revenue, the bank is considering charging clients new or higher fees for banking services, said the people familiar with the matter. There’s also the option of passing on the European Central Bank’s negative rates to retail clients, but that’s something the German lender has said it doesn’t currently plan to do. Commerzbank says it made up for the impact of negative rates by lending more in the first half of this year, but revenue still fell.Zielke’s team is also considering working with other lenders on digital banking products, one person said. While it’s not yet clear how revenue and costs would be shared, one such potential partner is ING Groep NV, the person said. Speculation of closer ties between the two banks was fueled after Commerzbank named ING executive Roland Boekhout as head of corporate clients, starting next year.The Dutch bank earlier this year had been seen as a potential acquirer of Commerzbank following the breakdown of the talks with Deutsche Bank, but interest appears to have waned now that the economic outlook clouded over. No suitors are currently “knocking” on the German bank’s doors, finance chief Stephan Engels said this month.(Updates with details on previous branch strategy in eighth paragraph.)To contact the reporters on this story: Steven Arons in Frankfurt at sarons@bloomberg.net;Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.netTo contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian BaumgaertelFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Turkey to Reward Banks That Lend More With Looser Reserve Rules
    Bloomberg

    Turkey to Reward Banks That Lend More With Looser Reserve Rules

    (Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Turkey’s central bank is following its record monetary easing with a push to get credit flowing again.Under regulatory changes unveiled on Monday, policy makers will determine the amount of cash banks must put aside as reserves depending on how much credit they extend in an effort to boost the economy through faster lending growth.Within the current tiered framework, the reserves are effectively an insurance against bank liabilities -- such as deposits and participation funds.The central bank said the revision will initially unlock about 5.4 billion liras ($960 million), and also provide $2.9 billion of gold and foreign-currency liquidity to the market.The central bank’s “decision is an act of expansionary monetary policy and insofar is in itself lira-negative,” said Ulrich Leuchtmann, head of currency and commodity research at Commerzbank AG in Frankfurt. “Maybe it is so much focused on pushing the real economy that it became blind to inflation risks.”The lira fell on concern authorities are moving to loosen policy more aggressively than previously assumed. It suffered one of the world’s biggest losses after the announcement before partly recouping declines on Tuesday. The reaction in bank stocks was mixed.State banks stand to benefit the most from the changes because they’ve been at the forefront of government efforts to extend cheap loans.Required reserve ratios for banks with loan growth of 10% to 20% will be set at 2% -- with some exceptions -- while remaining unchanged for other banks, according to a statement on Monday. The ratios are currently at 7% for deposits of up to three months, 4% for six months, and 2% for up to one year.Additionally, the current remuneration rate of 13%, applied to mandatory lira-denominated reserves, is set at 15% for banks with 10%-20% loan growth and at 5% for others.“The move is intended to incentivize lending,” Goldman Sachs Group Inc. economists Murat Unur in London and Clemens Grafe in Moscow said in a report. “Given banks’ hesitancy to increase lending, as implied by the flat loan stock,” similar moves “are also likely to continue.”(Updates with analyst comment in fourth paragraph, lira and stocks performance starting in fifth.)To contact the reporters on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net;Constantine Courcoulas in Istanbul at ccourcoulas1@bloomberg.netTo contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, ;Lin Noueihed at lnoueihed@bloomberg.net, Paul Abelsky, Alaa ShahineFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • The Bond Markets Are Begging for Infrastructure Spending
    Bloomberg

    The Bond Markets Are Begging for Infrastructure Spending

    (Bloomberg Opinion) -- Bond buyers worldwide, awash in negative-yielding debt, are crying out for fiscal spending. A seven-minute stretch in the German bund market proves it.On Aug. 8, just before 9 a.m. in New York, Reuters published a headline that blared “Germany mulls fiscal policy U-turn.” According to an anonymous senior government official, Germany was considering abandoning its long-held balanced budget goal and instead was looking to fund an expensive climate-protection package with new debt. That unleashed a sell-off in bunds the likes of which hasn’t been seen in recent months. In minutes, yields “went parabolic” in a move that looked like one massive straight line upward. They shot up even faster than they did after European Central Bank President Mario Draghi gave a relatively upbeat assessment of the region’s economy after its most recent decision on July 25. Kevin Muir, a market strategist at East West Investment Management Co., said on Twitter what bond traders were thinking: “BOOM! Game on! Don’t underestimate how big this announcement is. Fiscal changes the whole equation.”The watershed moment didn’t last. Germany’s Finance Ministry quickly dashed hopes of widespread fiscal spending, commenting publicly that no decision has been made on giving up on a balanced budget. The official who talked to Reuters warned of such resistance, saying that “the challenge now is how to shape such a fundamental shift in fiscal policy without opening the flood gates for the federal budget” because “once it is clear that new debt is no longer a taboo, everyone raises a hand and wants more money.”To some, this commitment to fiscal restraint is commendable. It certainly provides a stark contrast to the trillion-dollar budget deficits in the U.S. But when a whopping $15.5 trillion of global debt yields less than zero, including the entire German curve, the lack of government spending could very well be doing more harm than good. Fitch Ratings, for instance, noted in a report this week that rock-bottom interest rates aren’t entirely good news for sovereign nations. While they make borrowing costs more manageable, they also speak to a gloomy outlook for the future:“The economic conditions leading to structurally lower yields may not be as supportive of sovereign credit. Lower interest rates to some extent reflect weaker potential GDP growth stemming from slower productivity growth and demographic changes. These, along with low inflation, will adversely affect growth in government revenues and put upward pressure on age-related spending, adding to fiscal challenges.”Simply put, negative yields are a painfully obvious sign that governments have room to take on more debt for projects like infrastructure improvements and climate-change related endeavors. They ought to seize the moment.Infrastructure, in theory, should be one of the easiest things for Democrats and Republicans to agree upon. Yet it has become something of a punch line and a symbol of Washington’s paralysis. With the U.S. government able to borrow at a near-record low 2.15% for 30 years, it sure would seem like an opportune time to address the 47,000 structurally deficient bridges across the country. Recent examples abound of how this has become a pressing issue, including a railing collapse in Chattanooga, Tennessee, earlier this year in an area the mayor called “one of the most heavily trafficked intersections in the country.” Or perhaps the federal government could be bold and take a more active role in high-speed rail or finally make an additional train tunnel linking New Jersey to Manhattan a reality.At least some people in Washington understand that spending more on infrastructure would be a near-surefire way to boost the country’s long-term growth potential. Jeffrey Stupak, a macroeconomic policy analyst for the Congressional Research Service, noted in a report last year that direct federal spending on nondefense infrastructure was less than 0.1% of gross domestic product in 2016 and that its relative spending lagged behind most Group of Seven countries (naturally, Germany spent even less). The White House’s Council of Economic Advisers also published a report extolling the benefits of a 10-year, $1.5 trillion program of infrastructure investment.All else equal, increasing the economic growth potential of a country should boost inflation, which, in turn, should send bond yields higher. This is the feedback loop that bond traders have been craving and thought they might be getting when hearing about a fiscal U-turn in Germany. Instead, markets are left with the narrative of negative yields and a “safe-asset shortage,” prompted in part by post-crisis banking regulations like Dodd-Frank and Basel III, in part by huge  quantitative easing programs among global central banks, and in part by individuals who are living longer and are focused on saving for retirement. Perversely, this seems to have put the banking system at greater risk — shares of Frankfurt-based Commerzbank AG fell to a record low this week, for instance — and has made it all the more difficult for pension plans to meet their promises.The bond markets aren’t demanding fiscal profligacy. All they’re suggesting is a modest loosening of the purse strings, with money directed toward projects that benefit the overall economy. The problem, of course, is that more spending is usually framed as “bad” while lowering taxes is “good,” even though they both widen the budget deficit. In truth, both have appealing qualities — but only when applied properly.Infrastructure spending done right potentially solves several structural problems in one shot. It offers construction jobs to those who might not otherwise have one, further adding to record employment numbers. It creates new or improved structures that will be used for decades and will move people and products more efficiently. It will lead to more sovereign borrowing, which feeds the appetite for safe assets. And, most crucially for the bond markets, it could counter easy monetary policy and some of the other forces leading to negative interest rates.This is a better solution than trying to rationalize guaranteed losses on bonds. The U.S., Germany and other sovereign nations have a clear green light to borrow. It’s up to elected officials to step on the gas.To contact the author of this story: Brian Chappatta at bchappatta1@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Germany to review options for its 15% Commerzbank stake
    Reuters

    Germany to review options for its 15% Commerzbank stake

    Germany is looking for an external advisor to evaluate options for its billion-euro stake in Commerzbank , the country's second-biggest listed lender, a public tender offer showed. Berlin, through the Federal Finance Agency which oversees state investments, earlier this week posted a public offer to find a financial expert for "consulting regarding Commerzbank stake". The step by the German government, by far the bank's biggest shareholder with a stake of just over 15%, comes at a time shares in the bank are nearing an all-time low following a failed merger attempt with cross-town rival Deutsche Bank .

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