Deutsche seeks funds to firm up capital buffers

 
Michael Bow
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GERMAN investment bank Deutsche Bank yesterday said it would raise €2.8bn (£2.4bn) of fresh cash from investors in a bid to boost its regulatory capital buffers.

The bank, the biggest in Germany, will place up to 90m shares with existing investors to raise the funds and could tap the market for a further €2bn by selling subordinated capital instruments over the next year, it said yesterday.

“The purpose of the capital increase is to strengthen the equity capitalisation of the bank,” the firm said in a statement. “The new shares will have full dividend entitlement for the fiscal year 2012.”

The move is set to boost the bank’s core tier 1 capital from 8.8 per cent as at 31 March 2013 to about 9.5 per cent.

Juergen Fitschen and Anshu Jain, co-chairmen of the Deutsche management board, said: “The primary objective … is to position the bank to be nimble enough to capitalize on opportunities to invest in our franchise and create long-term value for our shareholders.

“Our strong momentum to date, including the further capital supply measures we previously identified as a part of our capital toolbox, enable us to accelerate our progress.”

The news came as Deutsche posted a 28 per cent increase in first quarter pre-tax profits for the year, up to €2.4bn against €1.9bn a year ago.

It was helped along by two per cent up tick in revenues up to €9.4bn, with the strongest growth of eight per cent coming at its asset and wealth management unit where revenues grew to €1.2bn.

Overall net revenues at its flagship corporate banking and securities fell by four per cent while its sales and trading division saw a 14 per cent decline in revenues.

But a drastic cost cutting regime helped cushion the falls and drive down its cost base, slashing non-interest expenses seven per cent over the year by about €201m. The firm said the move downwards was partly driven by lower compensation.

“We are proud of the achievements of the bank in the first quarter of 2013,” Fitschen and Jain said in a statement. “We delivered robust financial performance, with substantial profit growth versus the prior year quarter.”