Deutsche restructure sees investment IPO as it bids to raise €8bn

Deutsche Bank is going to the markets to ask investors for €8bn (US$8.5bn) to help improve its financial health as it has announced that it is to break up its business, including listing its asset management arm for sale, as it bids plans to secure its financial future.

After two years of heavy losses, Germany’s biggest bank announced plans for the huge share sale on Sunday, along with another overhaul of its strategy. The announcement also said that Jeffrey Urwin, head of corporate and investment banking, will step down, and a new chief finance officer will be sought.

Deutsche Bank said it will seek to raise about €8bn (US$8.5bn) in the coming weeks –its fourth capital hike since 2010. The four add up to a total of about €30bn (US$32bn), which more than the bank’s current market value, according to current valuations.

The move is part of a series of measures including the setting of new financial targets by the German financial giant, after spending two years dealing with its past misdeeds and huge losses. The company’s statement said that it intends to launch an US$8.5bn (€8bn) rights issue of 687.5 million new shares on March 21, priced at around a 39% discount to Friday’s closing price of €19.14.

Adjusted figures

The bank said that it has set new financial targets that replace the existing targets originally announced in October 2015. It said that it will target an adjusted cost base (including Postbank) of about €22bn by 2018 and about €21bn by 2021, compared to €24.1bn in 2016 (after business disposals).

In its statement it said that it is anticipated that this will require restructuring and severance costs of approximately €2bn, the majority of which is expected to be incurred in 2017 to 2019. The bank will aim to reach a return on tangible equity of 10% in a normalised operating environment.

Huge fines

Deutsche has, as reported, been under-fire in recent times and has been hit with huge fines from international regulators in both the US and the UK over bond mis-selling and a Russian money laundering probe. In December, as reported, Credit Suisse and Deutsche Bank both agreed to settle a decade-old toxic bond mis-selling scandal, with Deutsche agreeing to pay a fee of US$7.2bn (£5.9bn) and Credit Suisse agreeing to pay US$5.3bn (£4.26bn)

Announcing its plans for a fourth share sale, John Cryan, Deutsche Bank CEO said: “Our decisions are a significant step forward on the path to creating a simpler, stronger and growing bank. The capital increase will reinforce our financial strength substantially. The new three-pillar structure of our operating business should position us for significant growth, both in revenues and earnings.” 

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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