Moody's drops Commerzbank's rating by one notch

International ratings agency Moody's said Tuesday it was dropping the long-term debt rating of Germany's second-largest bank, Commerzbank, by one notch to Baa1 from A3 negative.

The agency cited the bank's "weaknesses in core banking activities" and its poor earnings in 2012.

Although the bank's capitalisation gave it a buffer against some losses, the institution's long-term weaknesses made it vulnerable if the eurozone debt crisis persisted, Moody's said.

Last month, Commerzbank said it would undertake a 2.5-billion-euro ($3.3-billion) capital hike to pay back state bailouts received during the 2008-2009 financial crisis.

The transaction is planned for the period from mid-May through to the beginning of June.

In the course of the capital increase, the shareholding of the federal government in Commerzbank is expected to decrease from about 25 percent at present to less than 20 percent, the bank said.

In a credit update last Thursday, Moody's maintained Germany's top "Aaa" rating, albeit with a negative outlook, a day after rumours over a possible German downgrade had rocked European stock markets.

The agency emphasised, however, that its annual credit report on Germany "is an annual update to the markets and does not constitute a rating action."