Commerzbank shares fall on nationalisation report

Commerzbank reported a 687m-euro loss for the third quarter

Shares in Commerzbank have dropped after a report suggested that Germany is prepared to nationalise the bank if needed.

Der Spiegel, citing government sources, reported on Sunday that Germany could reactivate a rescue fund and buy shares if its second-largest bank cannot raise money by June 2012.

Shares fell 5.3% in early trading. They have dropped 68% so far this year.

The German government already has a 25% stake in the bank.

German banks - heavily exposed to eurozone debt that is the focus of the current financial crisis - have been hit this year and Commerzbank is considered one of the weaker banks.

Its shares fell 22% alone last month.

On Monday, Commerzbank responded by saying it would repurchase up to 600m euros ($804m; £516m) in securities to shore up its capital.

"As another step in its capital management, Commerzbank is offering investors in selected hybrid equity instruments - so-called 'trust preferred securities' issued by companies of the Commerzbank group - to repurchase these instruments against cash consideration," the bank said in a statement.

Der Spiegel said that the German banking sector stabilisation fund, Soffin, could be reactivated to let the federal government buy shares if the bank cannot raise money on its own.

Soffin was used to buy a 25%-plus-one-share stake in the bank in 2009 amid the financial crisis.

Commerzbank reported a 687m-euro loss in the third quarter, largely attributed to its exposure to Greece sovereign debt.

The possible higher capital requirement for Commerzbank could raise questions about whether the German banking sector as a whole requires extra funds.

In October, the European Banking Authority calculated that Germany's banks would need about 5.2bn euros.