Commerzbank says it can meet capital requirements

FRANKFURT, Germany — Commerzbank announced Thursday that it had found a way to meet European Union requirements to increase its capital cushion against possible losses from the eurozone debt crisis.

The bank, whose shares rose as much as 14 per cent Thursday on the news, said it would plug a (euro) 5.3 billion ($6.8 billion) capital shortfall identified by the European Banking Authority by “relying on its own strength” — rather than taking another state aid package. The German government already owns 25 percent of the bank after a previous bailout.

Commerzbank said it will raise (euro) 6.3 billion in capital by holding back cash from its quarterly earnings and cutting back on risky investments. The bank has until June 30 to find the additional financial padding.

The EBA is pushing banks across Europe to raise (euro) 115 billion ($147.56 billion) in new capital by June 30 to strengthen the banking system against the eurozone government debt crisis. The debt crisis affects banks because they hold large amounts of government bonds, whose prices have been affected by fears of default.

European officials are trying to strengthen banks to prevent the debt crisis from making banks cut off loans to businesses. That could hurt the economy and deepen what is expected to be at least a mild eurozone recession.

Commerzbank said it had already found (euro) 3.0 billion of the requirement by the end of last year by setting aside (euro) 1.2 billion in fourth-quarter profits and by cutting its risky loans, securities holdings and other investments by (euro) 1.6 billion. Reducing loans and investments — so-called risk weighted assets — reduces the amount of capital needed to backstop against any potential losses on those investments.

It added it would find the rest by the deadline using similar methods, saying that it would also save (euro) 250 million by compensating some employees in stock instead of cash.