Deutsche Bank AG, the largest bank in continental Europe, will raise €4.9 billion euros from investors for capitalization, three months after co-CEO Anshu Jain said that a sale of shares is not in the best interest of investors.
Under this capitalization program, the company issued shares worth €2.96 billion ($3.88 billion) at €32.90 each. Deutsche Bank, which sells more than 90 million new shares to investors, received enough purchase orders, according to a statement released yesterday by the bank. Furthermore, Deutsche Bank will sell €2 billion worth of debt.
Anshu Jain planned the capital increase to coincide with the presentation of the first quarter earnings, which were up by 19%, exceeding analysts’ expectations. He increased capital reserves after the credit rating agency Standard & Poor’s warned it could downgrade the rating for the bank.
Jain said in January that he is prepared to sell assets at a loss as opposed to issue new shares citing the price of the shares. “We are now among the best capitalised banks in our global peer group,” said today the Deustch Bank chief.
Deutsche Bank shares rose 7.7% to €35.44 in Frankfurt trading session, marking the biggest advance since August. At this level, the bank has a market value of €33 billion. JP Morgan Chase and Deutsche Bank upgraded the credit rating for the bank from neutral to “overweight.”
“Deutsche Bank is finally starting to address its capital issues.” As the bank has turned “to one of the best capitalized” large banks in Europe, it is not “out of woods” because of costs for stricter regulations and legal requirements, JP Morgan analysts say.
The sale of shares will increase Tier I capital of Deutsche Bank to 9.5 percent from 8.8 percent at the end of March. JP Morgan has an indicator of Tier I of 8.9 percent for the first quarter, while Goldman Sachs’ indicator is 9 percent.
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