Deutsche Bank Plans $8.5 Billion Capital Increase

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 [e-mail]

(END) Dow Jones Newswires

March 05, 2017 11:25 ET (16:25 GMT)

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