World Economy

Deutsche Bank Plans to Boost Capital by $10.6b

Deutsche Bank Plans to Boost Capital by $10.6bDeutsche Bank Plans to Boost Capital by $10.6b

Deutsche Bank AG is nearing a plan to boost capital by more than €10 billion ($10.6 billion) through an equity offering and the partial sale of its asset management unit, according to people with knowledge of the discussions.

The measures, which executives may review as soon as this weekend, would be a way for the bank to boost capital buffers instead of by selling its Postbank unit, said the people, who asked not to be identified because the plans haven’t been announced. Deutsche Bank is now leaning toward reintegrating the consumer banking business, the people said. No final decision has been made, they said, Bloomberg reported.

It’s also studying management changes, including a new role for Chief Financial Officer Marcus Schenck, some of the people said. The firm is weighing recombining its investment banking and trading divisions, with Schenck gaining some oversight of the business, some of the people said. Among the options the bank is considering is creating a deputy chief executive officer role, the people said.

The supervisory board is scheduled to meet for two days starting March 16 to discuss potential measures, three people said earlier Friday.

Deutsche Bank has almost doubled in market value since Sept. 26, reflecting relief over its US mortgage securities settlement and the brighter outlook for banks following Donald Trump’s election. Selling Postbank, which employs 18,000 people, had been a cornerstone of CEO John Cryan’s strategy to boost capital and profitability, but the bank has been unable to find a buyer.

“A capital increase is probably the best option given the alternatives, everything else would cut into real business,” said Michael Huenseler, an investor at Assenagon Asset Management, which has stock in Deutsche Bank. “But it will be an enormous dilution for shareholders at the current price-book ratio.”

 IPO Benefits

A majority of the supervisory board favors reintegrating Postbank, accompanied by a capital increase, one person said. Schenck last month said the lender would only sell Postbank if a deal provided “meaningful capital relief” to Deutsche Bank.

A spokeswoman for Deutsche Bank declined to comment.

Deutsche Bank shares fell 1.3% to €19.14 in Frankfurt Friday. The stock trades at about half the bank’s tangible book value, below European peers including UBS Group AG, which trades at 1.3 times book, and France’s BNP Paribas SA at 0.9 times book.

Deutsche Bank could sell as much as 30% of the asset management unit in an initial public offering, the people said. The division had €774 billion of client assets at the end of 2016.

An IPO of the fund management business may be attractive to investors who have watched the success of Amundi SA, France’s largest asset manager, since controlling shareholder Credit Agricole SA listed it on the Paris market. The stock is up more than 20% since its IPO in November 2015, and the company posted its highest quarterly inflows in two years in the fourth quarter.

Deutsche Bank’s asset management had seen six consecutive quarters of net money outflows by the end of last year. Division head Nicolas Moreau, who joined the business in October, has pledged to reverse the trend.


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