Share sale at Deutsche Bank no longer a taboo

Lucy Hill
March 6, 2017

"Our decisions are a significant step forward on the path to creating a simpler, stronger and growing bank", John Cryan, the firm's chief executive, said in a news release.

As well as the capital increase, Deutsche plans to retain subsidiary Postbank - long slated to be sold off - and partially float its Deutsche Asset Management unit.

In an interview seven weeks ago with CNBC, Cryan said that hiking capital was not the best option to improve its financial situation. The company has tried to sell the Postbank business since spring 2015. "The sale of a minority stake in the asset management is something in the right direction", the source said.

Jeff Urwin, who led the investment banking division, will retire from the management board after a transition period, the bank said.

The firm plans to cut more than €2 billion of costs from the €24.1 billion in adjusted expenses it had a year ago.

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The move comes after Deutsche Bank posted a net loss of 1.9 billion euros in the final quarter of 2016 as legal costs for past misdeeds weighed heavily on results and the bank fell further behind its Wall Street rivals, lagging their strong rebound in bond trading.

The fundraising plans confirm many investors' expectations that Deutsche Bank would be forced to tap the market for the third time since early 2013.

The bank also set new near-term financial targets, including a post-tax return on tangible equity of around 10% under normal conditions and a "competitive dividend payout ratio for fiscal year 2018 and thereafter".

"We still need to manage two items in parallel, which is the capital buildup until the end of 2018 where we need to be or want to be at least at 12.5%, and we're committed to that and do everything that is necessary".

Losses and mounting legal bills raised doubts about Deutsche Bank's financial strength, which intensified after the U.S. justice department in September demanded $14 billion (€13.2 billion) to end an inquiry into mortgage securities that fuelled the 2008 financial crisis.

Other reports by TheDailyFarc

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