Deutsche Bank seeks 8b euros selling shares at 35% discount

Deutsche Bank, which is seeking to raise 8 billion euro (US$8.6 billion) from shareholders, has predicted that group revenues would be steady in 2017 as it reported a strong start to the year in bond trading.
The headquarters of Germany's Deutsche Bank in Frankfurt.
The headquarters of Germany's Deutsche Bank in Frankfurt.PHOTO: REUTERS

FRANKFURT (BLOOMBERG) - Deutsche Bank said it will raise 8 billion euros (S$12.05 billion) by selling stock at a 35 percent discount to last week's closing price as Germany's largest lender seeks to shore up its finances and boost growth.

The company will issue 687.5 million new shares at 11.65 euros apiece, it said in a statement on Sunday (March 19), in-line with the firm's March 5 announcement on the planned sale. The offer compares with the stock's closing price of 17.86 euros on Friday, and is almost 41 per cent lower than where the stock traded when Bloomberg first reported that the bank was weighing a capital raising. Existing investors will be able to acquire one new share for each two they now hold.

The sale, which will run from March 21 through April 4, will be the fourth capital infusion for Deutsche Bank since 2010. chief executive officer John Cryan, who had previously said he didn't want to tap shareholders, reversed course this month after the shares almost doubled from their September low and Deutsche Bank was unable to find a buyer for a consumer banking unit.

Even after slipping this month ahead of the capital increase, the stock is still up 80 per cent from an intraday low on Sept 30, amid renewed optimism for banks as investors speculate economic growth and rising borrowing costs could revive earnings.

"The environment for the share sale is almost perfect, given the expectation of higher interest rates and buoyant equity markets," Ingo Frommen, an analyst with LBBW who has a hold recommendation on the stock, said ahead of Sunday's announcement.

Germany's largest lender has posted more than 8 billion euros of net losses in the past two years as Cryan settled misconduct cases and scaled back risk in the investment bank. He's trying to sweeten the offer with the promise of renewed dividends and a return to profitability this year.

The bank said previously that the latest share sale would boost its common equity Tier 1 ratio, a key benchmark of financial strength, to 14.1 per cent and vowed to keep it "comfortably above" 13 per cent. The measure stood at 11.9 per cent at the end of 2016.

Asset Management The lender also said it will sell a minority stake in its asset management unit through an initial public offering in the next two years. That, along with more minor asset disposals, will help raise at least another 2 billion euros of capital.

The bank is considering the sale of retail operations in India and European countries including Spain as part of the plans to boost capital levels, people with knowledge of the matter said earlier this month.

Deutsche Bank has said earlier this month that the capital increase was fully underwritten at 11.65 euros a share by banks including Credit Suisse Group, Barclays, Goldman Sachs Group, BNP Paribas, Commerzbank, HSBC Holdings, Morgan Stanley and UniCredit. The group of banks underwriting the deal has increased to 30, it said Sunday.

Qatar's royal family and China's HNA Group, two of Deutsche Bank's biggest investors, plan to buy shares in the rights offer with a view to increasing their stakes, people with knowledge of the matter said earlier this month.