Commerzbank shares fall after 1.4 billion euro share sale

FRANKFURT (Reuters) - Commerzbank shares lost 4 percent in early trading on Tuesday after Germany's second-biggest lender sold new shares equal to 10 percent of its equity to bolster its capital strength. The new shares were sold at 12.10 euros apiece, representing a 6.3 percent discount to Monday's close for proceeds of 1.38 billion euros (1 billion pounds), Commerzbank said in a statement. The money raised is close to the $1.45 billion the bank agreed to pay in a settlement with U.S. authorities last month to end an investigation into whether it breached sanctions against countries such as Iran and Sudan, raising questions over the potential need to strengthen its capital position. Two sources familiar with the share sale transaction told Reuters that the capital increase was not connected with plans by rival Deutsche Bank to sell its retail chain Postbank . "We are disappointed by the dilution of shareholders with the announcement of a 10 percent capital raise," analysts from JP Morgan analysts said in a note explaining its downgrade of Commerzbank shares to "neutral" from "overweight". The sale proceeds lifts Commerzbank's core Tier 1 capital ratio to 10.2 percent from 9.5 percent and its leverage ratio to 3.9 percent from 3.7 percent, it said. These ratios help to gauge a bank's financial strength. Late on Monday the bank also reported an 83 percent jump in first-quarter net profit to 366 million euros. Commerzbank's first-quarter results improved both at its operating divisions and the so-called bad bank that holds non-core assets it has been selling since the financial crisis, the bank said. The share placement was organised by Commerzbank and Deutsche Bank. (Reporting by Arno Schuetze; Editing by David Goodman)