Deutsche Bank raises more cash than expected

Deutsche Bank logo.

Deutsche Bank logo.

Published Jun 5, 2014

Share

Frankfurt - Deutsche Bank priced its rights issue at a higher than expected 22.50 euros per share on Thursday, raising more capital than initially anticipated to fortify its regulatory ratios and fund a restructuring.

The bank said it would issue 299.8 million new shares, offering five new shares for every 18 shares held by existing shareholders.

Proceeds from the issue would total 6.75 billion euros, the bank said in a statement, raising to 8.5 billion ($11.6 billion) euros the total amount of capital that Deutsche will raise in the two-step capital hike, its second hike in as many years.

The rights issue forms the lion's share of an 8.5 billion euro capital hike announced by the bank in mid-May to strengthen its capital base and to see through a costly restructuring.

“It is good that DB is beginning to fill the real and perceived capital gap that they have suffered since the financial crisis,” said a European fund manager.

“The equity issue is necessary to achieve this and it good to see management dealing with this despite the large size of the deal.”

The price of 22.50 euros per share represents a discount of around 21 percent to the theoretical share price accounting for the dilution of the new shares, meaning Deutsche was not forced to offer the shares at a huge discount.

That compares favourably to discounts of 33-38 percent to TERP for recent capital hikes by Commerzbank, Sabadell and Barclays.

The new money will allow the bank to lift its key regulatory strength measures more expected when the bank announced the plan in May.

Market participants had pointed to a price range between 21 euros and 21.50 euros in recent days but said the range was subject to fluctuations depending on the bank's actual share price.

 

FULL STEAM AHEAD

Germany's largest bank has spent the past two weeks marketing the rights issue to its shareholders with promises of both cost cuts and future growth.

Investors have broadly welcomed the issue, saying it will put concerns about capital weakness to rest for at least a year as co-Chief Executives Anshu Jain and Juergen Fitschen complete a turnaround plan.

Deutsche sees itself as Europe's last man standing in the investment banking sphere after a pull-back by Barclays , UBS and others left a gap that it aims to fill as a top debt trader.

It wants to fortify its position in North America and Asia in wealth management and investment banking while modernizing its domestic retail franchise in Germany.

But at least half of the new money will go to filling new capital demands triggered by regulatory reforms, bank officials have told investors.

That puts Deutsche in good company. In less than a year, banks participating in the balance sheet review led by the European Central Bank have raised more than 104 billion euros by raising new cash, withholding provisions, and other measures, ECB officials have said.

Trading in the subscription rights on the German stock exchanges is expected to take place from June 6 to June 20.

Deutsche shares have fallen some 14 percent since the start of the year compared with a 5 percent rise on average by rivals , partly due to expectations of a dilutive capital hike.

The issue hit a procedural delay on Wednesday that forced the bank to stall the pricing by one day. - Reuters

Related Topics: