FRANKFURT, Germany—Commerzbank AG said Wednesday it has reached agreements with US institutional investors on the sale of two portfolios of mainly non-performing commercial real estate loans. A joint venture of JP Morgan Chase and Lone Star Funds is acquiring a pan-European portfolio of loans, while Oaktree Capital Management is taking a German portfolio. The combined face value of the two portfolios is EUR 2.2 billion, or slightly more than US $3.2 billion.

Together, the two portfolios sold account for approximately 17% of the total of commercial real estate loans still held in the non-core asset segment as of March 31. Financial terms were not released, with Germany's second largest bank citing confidentiality agreements.

For Commerzbank, the sale of the EUR 700-million German loan portfolio to Oaktree reduces the bank's domestic “black book” of commercial real estate loans by about 40%. The European portfolio covers loans backed by properties on Austria, Belgium, Czech Republic, Cyprus, Denmark, Finland, Hungary, Luxembourg, the Netherlands, Rumania, Sweden, Switzerland, Slovakia and Turkey. The portfolio contains non-performing loans as well as other loans.

Along with reducing exposure to real estate, “we are significantly reducing both risk and complexity” through the sales to the JP Morgan JV and Oaktree, says Sascha Klaus, divisional board member for NCA commercial real estate at Commerzbank. “In this respect we are taking advantage of market opportunities, in order to achieve the best possible results through competitive bidding procedures.”

The bank expects the two sales to reduce earnings by 65 million euros in the second quarter and 20 million euros in the third quarter,  but says they will also release 105 million euros of capital, thereby bolstering its core capital. Bloomberg Business reported Wednesday that German lenders are cutting exposure to riskier assets as they shore up their balance sheets before the Basel III rules, intended to prevent a recurrence of the 2008 financial crisis, take full effect.