Deutsche Bank's $8.5 billion cash call marks end of era for cuts | Reuters

By Arno Schuetze
| FRANKFURT

FRANKFURT Deutsche Bank's (DBKGn.DE) chief executive said an era of cutbacks was over on Friday after completing an 8 billion euro ($8.5 billion) capital increase to pay legal penalties, keep regulators happy and make fresh investments."It is clear that we will not succeed by shrinking further," John Cryan said in a letter to staff after Deutsche Bank's latest capital hike, which took its total capital raised over seven years to 30 billion euros, just below its market value.Cryan's cash call was backed by top shareholders - a group of Qatari investors, U.S. fund Blackrock (BLK.N) and China's HNA Group - whose stakes and influence over Germany's biggest bank would otherwise have been diluted, one source said."Our capital increase should eliminate any remaining doubt about Deutsche Bank's stability. This is why it's even more important to focus on a topic that has been in the background for quite some time: growth," the British CEO said.Deutsche Bank shares were down 1.8 percent at the bottom of a flat German blue-chip index .GDAXI by 1452 GMT.

Deutsche Bank's fourth capital hike since 2010, previously described by Cryan as a last resort, involved about 80 percent of shareholders buying new shares, while the rest sold their rights, sources told Reuters.Cryan, who has pledged to reward shareholders' trust by seeing through a turnaround of Deutsche, acknowledged that recent feedback showed that while many investors and analysts in Europe were still skeptical about Germany's biggest lender, U.S. investors were more positive."They have seen first-hand how well banks are recovering in their home market and how profitable they can be. They expect us to turn the corner too," he said

The high-margin U.S. market, which accounts for half of Deutsche Bank's global investment banking revenues, will play an important role, he added, vowing to steer clear of business that could comes back to haunt it later in litigation costs.Deutsche Bank transformed itself into a major player on Wall Street over the past two decades, but extravagant bets and poor conduct has resulted in a litigation bill of 15 billion euros since 2009.

Until now, Cryan has focused on damage limitation and cost-cutting since taking over first as co-CEO in 2015 and then becoming sole CEO last year. NEXT STEP
The next big step in Deutsche's reorganization, announced last month, is a plan to list a minority stake of its asset management business, which includes its mainstay DWS retail asset management brand. While a listing is no longer needed to get capital in line with regulatory demands - its capital ratio will now rise to 14.1 percent compared with the ECB's minimum requirement of 9.5 percent - it could help lift Deutsche's valuation. European banks on average trade just below their book value and Deutsche trades at half of its book value, while listed asset managers such as Schroders (SDR.L), Henderson (HGGH.L) and Aberdeen (ADN.L) trade at more than twice book value. Although Deutsche Bank has vowed to carry out the initial public offering within two years, people close to the matter say that the listing, which could value the asset management business at up to 8 billion euros, may be launched this autumn.It will only pull off the expected listing of 10-20 percent of the asset management business if equity markets are buoyant and it is able to fetch an attractive price, the sources said. A listing would also give the asset management division a paper currency for potential acquisitions and shares which could be used to incentivise management. (Editing by Georgina Prodhan and Alexander Smith)

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Published Date: Apr 07, 2017 10:30 pm | Updated Date: Apr 07, 2017 10:30 pm