Deutsche Bank Plans $8.5 Billion Capital Increase
March 05 2017 - 11:40AM
Dow Jones News
By Jenny Strasburg
Deutsche Bank AG said Sunday it will seek to raise EUR8 billion
($8.5 billion) through a share sale, a move to shore up the German
lender's capital less than two years into a major restructuring
under Chief Executive John Cryan.
The fundraising plans confirm many investors' expectations that
Deutsche Bank would be forced to tap the market for the third time
since early 2013. Since taking over in mid-2015, Mr. Cryan said he
wanted to avoid selling shares, which will hurt existing
shareholders. The bank also said it would reconfigure its business
structure, combining its global markets and its corporate and
investment bank, reversing a separation of the investment bank a
year and a half ago.
Mr. Cryan has tried to preserve capital by cutting costs, axing
employee bonuses and canceling annual shareholder dividend payouts.
But those steps haven't done enough. Mr. Cryan's hopes were
overwhelmed by multibillion-dollar legal bills, toughening capital
regulations and sagging profits in key businesses ranging from
German retail banking to deal-advising and trading. The bank said
it expects around EUR2 billion in restructuring and severance costs
in connection with its plans.
The timing of the capital increase seeks to take advantage of a
resurgence in Deutsche Bank's share price, which has almost doubled
from multiyear lows near EUR10 in September. The shares closed
Friday at EUR19.14 in European trading. Last year, corporate
clients and hedge funds pulled balances and other business from
Deutsche Bank over concerns about its legal costs and weak capital
position.
Deutsche Bank on Friday night confirmed investor expectations
that it needs a capital injection, saying it was doing "preparatory
work" for a share sale and considering other strategic moves.
Sunday afternoon, after a meeting of the supervisory board, the
lender said as expected that it plans to sell a minority piece of
its asset-management business via a public sale of shares. The plan
is part of a bid to stabilize that business after it has suffered a
long spate of asset declines.
Selling a stake would dent the advantage Deutsche Bank gains
from the asset-management division's profits, which are predictable
compared with more-volatile investment-banking and trading profits.
A stake sale would allow the lender to hold on to a business that
Deutsche Bank officials including Mr. Cryan have praised as an
important part of the bank. A partial float could help the bank
once again expand the division while boosting its capital
incrementally, some investors say.
Deutsche Bank also said Sunday it plans to fold its German
retail-banking unit called Postbank back into its ongoing
operations. That is a reversal of costly plans announced in 2015 to
separate the business in preparation for a spinoff.
Attractive buyers proved scarce in a crowded market where low
interest rates have hurt retail-banking profits.
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
March 05, 2017 11:25 ET (16:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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