Deutsche Bank considering capital increase as option for wider overhaul

Bloomberg

Deutsche Bank AG is considering options including a capital increase as part of a wider overhaul it plans to unveil in the next two months, people with knowledge of the matter said.
Tapping investors for fresh cash is the least favoured option because management is aware that it could trigger a backlash in light of Deutsche Bank’s low stock price, said the people, who asked not to be identified in discussing ongoing deliberations. Still, the bank hasn’t taken the option off the table as it may be needed to fund substantial cuts to the
investment bank.
The restructuring plans being explored aim to significantly cut the trading business, resulting in tens of billions of euros in risk-weighted assets being removed from the division’s balance sheet and placed in a separate unit to be wound down, the people said.
The move could require the bank to come up with capital to fund the new non-core unit, they said.
Chief Executive Christian Sewing has signaled deeper cuts as Germany’s largest lender struggles to make a profit, deeply frustrating shareholders who have seen the stock fall to a record low. The investment banking division, run by Garth Ritchie, has long been one of the biggest headaches for Sewing, whose previous attempts to lift profitability at the unit have largely foundered.
Deutsche Bank pared gains on the news, trading 0.8 percent higher at 1:54 p.m. in Frankfurt after rising as much as 2.3 percent earlier. The stock hit a record low last week.
The lender has raised almost 30 billion euros ($34 billion) in four capital increases over the past decade.
The last time it tapped shareholders was in 2017, when it got 8 billion euros under then-CEO John Cryan.
Sewing said last week he won’t shy away from “tough cuts” to the investment bank, without specifying where they would occur. He singled out areas that are performing well and therefore are likely to be exempted, such as origination and advisory as well as foreign exchange, global credit trading and US commercial real estate. He didn’t mention the equities business and interest rates trading, suggesting cuts there are probable.