Deutsche Bank seeks to raise $8.5 billion in capital
Decisions agreed by the Management Board and Supervisory Board on Sunday aim to reinforce the bank’s roots in its home market of Germany and its position as a leading European bank with global reach.
The bank plans to combine Postbank and Deutsche Bank’s Private & Commercial clients business, float a minority stake of Deutsche Asset Management and create an integrated corporate and investment bank.
This strategic reorganisation is supported by a capital increase that aims to raise Deutsche Bank’s financial strength to a new level. By issuing up to 687.5 million new shares in a rights issue, the bank seeks proceeds of approximately 8 billion euros.
The issue is initially underwritten by Credit Suisse, Barclays, Goldman Sachs, BNP Paribas, Commerzbank, HSBC, Morgan Stanley and UniCredit. The subscription period is expected to start on March 21 and ends on April 6
Through this step, Deutsche Bank plans to reach a Common Equity Tier 1 ratio of 14.1 percent and a leverage ratio of about 4.1 percent (in each case fully loaded, pro forma as of December, 31, 2016).
Up to a 2 billion euros of further capital accretion is expected through asset disposals and the flotation of a minority stake of Deutsche Asset Management. The bank targets a Common Equity Tier 1 ratio of comfortably above 13 percent and a leverage ratio of 4.5 percent.
To simplify its structure and better meet clients’ needs, Deutsche Bank will focus on three business divisions in the future: a Private & Commercial Banm Deutsche Asset Management, and an integrated Corporate & Investment Ban.
Additionally, Deutsche Bank will align certain parts of its technology and other overhead functions to its business divisions to increase accountability and reduce costs.
Further synergies are planned within the new divisions, mainly from the German retail and commercial business and the integrated Corporate & Investment Bank.
The bank will target an adjusted cost base (including Postbank) of about 22 billion euros by 2018 and about 21 billion euros by 2021, compared to 24.1 billion euros in 2016 (after business disposals).
It is anticipated that this will require restructuring and severance costs of approximately 2 billion euros, 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 percent in a normalised operating environment.
The management has approved payment of the AT1 interest coupons coming due in 2017 and intends to propose at the Annual General Meeting in May 2017 to pay aggregate dividends of 0.19 euros per share, including the shares to be issued in the announced capital raise.
The aggregate amounts to approximately 400 million euros. The bank intends to propose at least a minimum dividend of 0.11 euros per share for 2017 and targets a competitive payout ratio for fiscal year 2018 and thereafter. ■