Deutsche Bank: Big Capital Call Offers Little Long-Term Reward

"Deutsche Bank confirms that it is conducting preparatory steps for a potential capital raise of approximately Euro 8 billion and several potential strategic measures".

The Frankfurt-based bank will issue nearly 690 million new shares in early April, with subscription rights for existing shareholders, to raise about 8.0 billion euros ($8.5 billion), chief executive John Cryan said during a conference call.

Deutsche Bank's capital position has always been a topic of discussion on Wall Street, and questions about capital have dominated recent earnings calls.

The plan to offer shares in the asset management business must be approved by German financial regulator BaFin.

A statue is pictured next to the logo of Germany's Deutsche Bank in Frankfurt, Germany September 30, 2016. The Company diversifies its activities into three group divisions: Corporate & Investment Bank (CIB); Private Clients and Asset Management (PCAM), and Corporate Investments (CI).

Deutsche Bank also announced today it had made a "positive start in the first two trading months of 2017".

While Deutsche Bank ended up negotiating its United States fines and compensation down to about $7 billion, the perception of weakness remained.

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The bank said the share sale would boost its common-equity Tier 1 ratio to 14.1 per cent and set a new target of "comfortably above" 13 per cent.

The timing of the capital increase seeks to take advantage of a resurgence in Deutsche Bank's share price, which has nearly doubled from multiyear lows near EUR10 in September.

In an interview seven weeks ago with CNBC, Cryan said that hiking capital was not the best option to improve its financial situation. The company will find a new CFO "in due course".

The bank will partially float its asset management business and retain Postbank - the retail banking business it had been expected to sell.

Merging Postbank with Deutsche's retail banking operations will create a bank with 20 million customers, offering economies of scale and synergies amounting to 900 million euros a year by 2022, Cryan said. The lender will propose a dividend in May of 0.19 euros per share and is recombining its investment banking and trading units.

Around 9,000 job cuts in Deutsche Bank's network of German branches have always been a part of Cryan's plans.

The lender also plans to reduce its annual severance and restructuring costs from $25.6 billion to about $22.3 billion in 2021 when it plans to implement all measures of its restructuring plan.

(Copyright © 2015. All Rights Reserved.)
 
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