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Commerzbank down on liquidity fear
FRANKFURT, Germany -- Commerzbank, Germany's third-largest bank, saw its stocks sink on Monday morning over concerns the bank may face a liquidity crisis. The German bank fiercely denied it had any problems after the Financial Times quoted a leaked email from Merrill Lynch raising fresh concerns about its financial health. A member of Merill's corporate credit department wrote an email to ratings agency Standard & Poor's referring to speculation that sharp falls on financial markets may have left Commerzbank with big trading losses. Commerzbank's (FCBK) stock dropped more than nine percent to levels last seen a decade ago. Its shares, which have fallen more than 70 percent from a high of 21.29 euros in March, were down 6.5 percent to 5.65 euros in mid-morning Frankfurt trading on Monday. "I think the big problem is the liquidity standing in the wholesale markets which is indicated by credit default swaps,'' Derek Chambers, an analyst at HSBC Securities in London, told Reuters. "They say they have got enough liquidity for now but given their fairly low operating margins, increases in cost of funding will be paid for.'' Chamber rates the stock a "sell.'' Paul Roy, co-president of global markets and investment banking at Merrill Lynch, apologised to Commerzbank Chief Executive Klaus-Peter Mueller and said the issue had been blown out of proportion. "This over-reaction is part and parcel of the slightly hysterical nature of the rumour mill in the market recently,'' he said on Saturday. "This situation arose as part of regular daily contact between our internal edit department and one of the rating agencies. It was a one-on-one email and we're mystified as to how it has become public and as to why it has been blown out of proportion.'' "In fact, we have had a satisfactory response from the rating agency and it has been business as usual for us with Commerzbank, a valued customer of ours. Importantly, we have made no change in our credit policy for Commerzbank.'' Mueller told Reuters last week the bank faced no problems with liquidity and had lending risks fully under control. "The bank enjoys consistently solid liquidity,'' he said. "Thanks to efficient risk controls, we have our problems under control, so there should be no questioning the existence of the bank.'' Ratings agency Fitch cut its outlook on Commerzbank to "negative'' from "stable'' on Friday, citing mounting pressure on the bank and a worsening economic climate.
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