Deutsche Bank plans to raise about 6.3 billion euros in a fully underwritten rights offer, and an additional 1.75 billion euros from the sale of a stake to an investment vehicle of Qatar, the Frankfurt-based lender said today in a statement.
“These measures will substantially increase the bank’s capital ratio, provide a buffer for future regulatory requirements, and support targeted business growth,” Deutsche Bank said in the statement.
Deutsche Bank, which is scheduled to hold its annual shareholder meeting on May 22, is shrinking assets to bolster its finances ahead of a European Central Bank stress test this year. The German lender, which joined the league of global investment banks more than 20 years ago with the purchase of Morgan Grenfell and the hiring of Merrill Lynch & Co. bankers including Anshu Jain, finished last year holding less capital than all but two of the nine biggest European and U.S. investment banks, data compiled by Bloomberg Industries show.
Deutsche Bank joins London-based Barclays Plc and Credit Suisse Group AG of Zurich in selling stakes to Qatar, the richest country in the world on a per-capita basis. Jain, 51, now co-chief executive officer alongside Juergen Fitschen, 65, said on April 29 that the investment-banking business would be “challenging” this year.
European banks are being urged to boost their ability to withstand losses before the conclusion of stress tests as the ECB leads the charge to prove the region’s banks are robust before it assumes the role of supervisor in November.
The bank said it expects the measures to boost its common equity Tier 1 ratio to 11.8 percent from 9.5 percent at the end of March. The bank will hold an analysts’ call tomorrow at 8 a.m. Frankfurt time to discuss the move.
The share sale will help the bank “address challenging operating conditions,” including “tighter regulatory requirements, the increased cost of compliance and litigation, and headwinds in the macro-economic environment,” Deutsche Bank said.
Deutsche Bank, whose shares have lost 11 percent of their value this year, said the rights offer will run through June 24. The stock gained 1 cent to close at 30.74 euros on May 16 in Frankfurt trading, giving the bank a market value of 31 billion euros.
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