Wirecard Rise

Commerzbank may be forced out of DAX

Commerzbank-Zentrale in Frankfurt
Well now this is awkward. Source: DPA

At night, the yellow-lit headquarters of Germany’s second-largest bank tower over the skyline of Frankfurt, the country’s financial capital. That would make it all the more embarrassing if Commerzbank gets kicked out of the benchmark DAX index. Ejection from the prestigious grouping of 30 blue chips would be yet another blow to the beleaguered bank, which has struggled to maintain profitability through an unending series of reorganizations.

The stock has traded well below €10 ($11.65) for weeks. Its market capitalization has fallen by more than a third since the end of January, to €8.3 billion. That has already pushed it down to 34th place among publicly-traded companies in Germany, and exposed it to removal in September’s reviews under the complex rules governing inclusion in the index.

Commerzbank has been part of the DAX since its inception in 1988. Its departure would mirror that of General Electric, an original component of the Dow Jones Industrial Average, and which was unceremoniously ejected from the iconic stock-market gauge earlier this month. Removal from the DAX would put the bank’s share price under further pressure, as those funds tracking the index would quickly sell the stock to rebalance their portfolios.

German fintech Wirecard is poised to take Commerzbank’s place in the index.

05 What goes up, must come down-01

Surging Wirecard could join DAX

Wirecard’s stock has risen some 60 percent in the last several weeks, overtaking Commerzbank in market capitalization and nearing that even of Deutsche Bank, the country’s flagship financial institution that risks going into an even more dangerous tailspin than Commerzbank. Wirecard, by contrast, is riding the boom in online shopping and card payments.

For the exchange to take place, Wirecard has to keep its current rank as the 30th most-valuable company and Commerzbank has to fall below 35th place. Other criteria of timing and volume also apply. But if Commerzbank slumps another 11 percent to €7.40, its fate is probably sealed.

Analysts caution that a lot can happen to a stock price between now and early September, when the DAX review takes place. Commerzbank’s shares have been dragged down by the problems at Deutsche Bank and could rebound. Likewise, Wirecard’s surge could fade. But investors remain pessimistic about the outlook for Deutsche, while the new populist government in Italy may reignite Europe’s sovereign debt crisis and weigh further on traditional bank shares. Even if the DAX switch doesn’t happen in September, it may just be a matter of time.

Georgios Kokologiannis covers finance for Handelsblatt in Frankfurt. Darrell Delamaide adapted this into English for Handelsblatt Global. To contact the author: kokologiannis@handelsblatt.com

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