Deutsche Bank Close to Successful $8.5 Billion Share Sale

By Jenny Strasburg

Deutsche Bank AG was closing in on a successful $8.5 billion share sale Thursday, the final day for investors to opt in to a capital-raising long seen as necessary to put the German lender on firm financial footing, according to people familiar with the matter.

The bank and its advisers were prepared to receive pledges for close to 100% of the shares available in the rights offer, in a preliminary tally that will be finalized Friday, the people said.

In at least one way, the capital-raising has diversified elements of Deutsche Bank's shareholder base. Overall, U.S. investors have participated in the share sale in greater proportion than they were represented as shareholders in the past, some of the people said.

Many of the bank's European investors have been burned by two other Deutsche Bank share sales since early 2013 and were more cautious about buying in this time around, according to people familiar with feedback the bank and its advisers received in recent weeks.

Investors and analysts were generally positive about the capital increase when it was announced March 5. However, some say they still have questions about Deutsche Bank's ability to meet cost-cutting and profit targets while managing a second investment-bank restructuring in just 18 months.

Executives are also contending with challenges related to employee morale and banker departures following steep bonus cuts, according to people inside and outside the bank. Deutsche Bank has said it is purposely cutting jobs as part of its strategy, and has played down other employee departures, saying voluntary staff departures have happened at near the usual pace and that the lender is still attracting strong talent.

Top shareholders--including members of the Qatari royal family and Chinese conglomerate HNA Group--participated in the capital increase, people close to the matter said. HNA increased its stake to around 4.8%, up from 3% in mid-February, according to March regulatory disclosures, and has discussed boosting that amount a bit further, according to people briefed on discussions about the investor. The Qataris own a stake just under 10% through two investment vehicles.

A Deutsche Bank spokeswoman declined to comment on the capital-hike participation or individual shareholders. Representatives of the shareholders couldn't immediately be reached or declined to comment.

Deutsche Bank shares were trading near EUR15.50 ($16.51) at midday in London on Thursday, and during the share sale have traded well above the steeply discounted EUR11.65 subscription price for the 687.5 million new shares issued.

The capital hike was led by Credit Suisse Group AG, along with Barclays PLC and Goldman Sachs Group Inc., initially with a total of eight underwriting banks. That number was later expanded to 30 banks, Deutsche Bank said March 19.

Deutsche Bank executives including Chief Executive John Cryan sought to avoid a share sale for much of last year but were forced to consider the option in part because they gave up plans to sell the lender's Postbank retail-banking business in Germany.

The bank suffered from persistent skepticism about its ability to handle potential losses and other financial shocks and still meet key interest payments and other obligations and hold on to clients. Legal settlements and related costs have weighed heavily on the lender.

In considering the timing and advantages of a capital hike, Mr. Cryan wanted to resume paying shareholders a dividend this year and put the capital question to rest, people close to the bank say. Also, by late January, Deutsche Bank's shares were trading above EUR19, compared with multiyear lows near EUR10 in the fall.

Along with the capital increase, Deutsche Bank last month promoted two senior executives, retail-banking chief Christian Sewing and finance chief Marcus Schenck, to new roles as deputy CEOs.

Deutsche Bank plans soon to name a new CFO and move Mr. Schenck over to co-head the recombined investment bank and trading business with markets chief Garth Ritchie.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

(END) Dow Jones Newswires

April 06, 2017 08:15 ET (12:15 GMT)

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