Deutsche Bank sets sights on €8bn in capital hike

German banking powerhouse Deutsche Bank wants to beef up its capital reserves by selling off millions of new shares, as well as overhauling its business structure, in the wake of massive losses and international sanctions. EURACTIV’s partner Milano Finanza reports.

At a board meeting yesterday (5 March), Deutsche Bank decided to react to its €1.4 billion loss last year by issuing nearly 700 million new shares and selling some of its assets.

The announcement confirms the fears of many of its investors; namely, that Deutsche Bank will implement its fourth capital hike since 2010.

Since taking over as CEO in mid-2015, John Cryan has insisted that issuing new shares was not on the agenda, due to the diluting effect it would have on existing shareholders. But in a call to journalists on Sunday, he said that “on strategy, it’s obvious we had a change of heart”.

Financial expert: Deutsche Bank collapse 'would probably trigger new global financial crisis'

Deutsche Bank is in crisis mode and its collapse could signal the beginning of a whole new set of economic woes for Germany, the EU and even the entire global financial system, expert Michael Schröder told EURACTIV Germany. But he insists that state aid is not the answer.

But the bank also announced that it would review its business structure, by integrating its securities trading division with its corporate finance business, reversing a decision it took in 2015 to separate the two entities.

Cryan’s aim when taking over the top job at the Frankfurt-based bank was to preserve capital by cutting costs, employee bonuses and putting an end to dividend distribution: but it wasn’t enough.

The British banker’s hopes were dashed when the bank racked up billions in legal fees and Deutsche Bank also didn’t enjoy the strong end-of-year rebound its rivals did. Structuring costs and severance pay will total around €2 billion under its plan.

Capital requirements are a divisive issue in the banking sector. In the EU they total around 14% of risk-weighted assets. Deutsche Bank’s plan would bring its capital ratio above 13%.

European Parliament to side with banks and reject new Basel banking rules

The European Parliament is expected on Thursday (10 November) to announce that it does not intend to accept new international standards that would require banks to have greater capital reserves. EURACTIV’s partner Milano Finanza reports.

The bank will be hoping to replicate the success of UniCredit’s February hike, when the Italian bank managed to raise €13 billion, Italy’s biggest ever rights issue.