Deutsche Bank AG (DBK), Germany’s biggest bank, is preparing to raise about 8 billion euros ($11 billion) by selling shares to shore up capital as it gains the Qatari royal family as a new shareholder.
The transaction will occur in two parts, the Frankfurt-based lender said today in a statement. It plans to raise about 6.3 billion euros in a rights offer, and an additional 1.75 billion euros selling a stake to an investment vehicle of Qatar.
“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 before the central bank assumes the role of supervisor in November. The rights offering will run through June 24, the company said.
Deutsche Bank shares have fallen 11 percent this year. They gained 1 cent to close at 30.74 euros on May 16 in Frankfurt trading.
(Reuters) – Deutsche Bank (DBKGn.DE) said on Sunday it would raise 8 billion euros in new capital, with the Qatari royal family lined up as a major new investor, in a bid by Germany’s largest bank to end questions about its capital position.
The bank had already raised 10.2 billion euros in equity in 2010 and a further 3 billion euros in 2013, but that had not been enough to assuage investor concerns about its capital position as if faces increased regulatory demands.
A stake worth 1.75 billion euros has already been placed with an investment vehicle owned and controlled by Sheikh Hamad Bin Jassim Bin Jabor Al-Thani of Qatar, Deutsche Bank said in a statement. It plans to raise another 6.3 billion euros in a rights issue to existing shareholders.
Deutsche Bank said it would focus on an “accelerated growth program” by hiring top bankers in the U.S., investing some 200 million euros over three years on digital improvements in Germany and Europe, hiring up to 100 advisers to support its biggest corporate clients and expanding its wealth management team in key markets by 15 percent over three years.
Deutsche Bank’s supervisory board met on Sunday to prepare the capital increase, sources familiar with the transaction told Reuters earlier.
New European Union rules requiring lenders to hold more equity capital to cover potential losses have put pressure on Deutsche to raise capital. A drop in profits, combined with a spike in litigation costs, have also dogged the lender.
The capital measures will increase Deutsche Bank’s Common Equity Tier 1 ratio by approximately 230 basis points, from 9.5 percent at the end of the first quarter of 2014 to 11.8 percent, the bank said.
“These measures enable Deutsche Bank to position itself for long-term, sustainable success in a time of historic change in the global banking industry,” Deutsche Bank’s co-CEOs Juergen Fitschen and Anshu Jain said in a statement.
Until now, Deutsche Bank had targeted a core tier 1 equity ratio of 10 percent under the Basel III bank rules in their most stringent form as of March 2015. It had aimed at achieving that mainly by retaining earnings.
Last month, Jain said the bank “would not rule out any option” to strengthen its capital base.
Tapping shareholders for cash represents a clear change in Deutsche’s plans. It said in January it had not discussed raising equity since raising 3 billion euros ($4.15 billion) from shareholders last year. ($1 = 0.7297 Euros)