Deutsche Bank Shares Rally on Capital Group Stake

By Patricia Kowsmann and Pietro Lombardi

Shares of Deutsche Bank AG (DBK.XE) rallied Thursday after Capital Group Cos., a large Los Angeles-based investment-management firm, disclosed a 3.1% stake in the German bank.

The move by Capital Group, which has over $1.9 trillion in assets under management, comes as Deutsche Bank is in the midst of a deep restructuring of its businesses aimed at making it leaner and profitable.

Last week the bank disclosed a $5.8 billion loss for 2019 on costs associated with the revamp, but it said restructuring efforts are on track, and in some cases ahead of schedule. It also reported better-than-expected capital levels, shooing away fears it may require shareholders to tip in to raise more.

Capital Group's stake makes it one of the bank's largest shareholders after the Qatari Royal family, BlackRock Inc. (BLK) and Hudson Executive Capital LP, which was the last to build a stake in the bank back in 2018.

Shares of Deutsche Bank were up 9% midday Thursday. It is up 30% so far this year, a sharp contrast to previous years when it struggled to convince investors of its business model and was hit by a series of legal challenges, including related to money laundering. That performance makes it the second best-performing stock in the Stoxx 600 index this year.

Like several European banks, Deutsche Bank is struggling to make money while interest rates remain low or below zero. Adding to its woes, its big investment-banking business--long its dominant revenue engine--is also suffering from stiff competition from U.S. peers.

After a failed attempt to merge with smaller German rival Commerzbank AG (CBK.XE) last year, Deutsche Bank moved to shrink and reorganize its global investment bank and focus on serving European companies and retail-banking customers. It pledged to slash costs and cut 18,000 of its approximately 92,000 jobs by 2022.

Capital Group has been a Deutsche Bank investor before, but not in the past two years, according to a person familiar with the holdings.

Write to Patricia Kowsmann at [e-mail] and Pietro Lombardi at [e-mail]

(END) Dow Jones Newswires

February 06, 2020 08:08 ET (13:08 GMT)

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