Deutsche Bank enlists Qatar in $11 billion capital hike

Sun May 18, 2014 5:49pm EDT
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By Alexander Hübner and Arno Schuetze

FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE: Quote) launched plans to raise 8 billion euros ($11 billion) in new capital on Sunday with the Qatari royal family a major new investor, in a bid by Germany's largest bank to end questions about its capital strength.

The bank had already raised 10.2 billion euros in equity in 2010 and a further 3 billion euros in 2013, but that was not enough to assuage investor concerns about its capital position as it faces increased regulatory demands.

The cash injection gives Deutsche the firepower to expand investment banking, especially in the United States, after a retreat by competitors Barclays (BARC.L: Quote), UBS UBSN.VX and others left a gap that Deutsche aims to fill.

"It was either an up or out moment. Either we had to affirm our strategy and reinforce it, or we had to consider the alternatives," said a source close to the transaction. "To us the alternatives have never been attractive."

The new money also helps the bank build up its regulatory ratios as the European Central Bank runs the region's top banks through rigorous checks before it becomes the euro zone's leading banking regulator in November.

But it underscores how the bank fell short of its ambitious turnaround targets and how burdensome fines and settlements and lagging profitability hampered management's efforts to fortify capital by retaining earnings.

A stake worth 1.75 billion euros has already been placed with an investment vehicle owned and controlled by Sheikh Hamad Bin Jassim Bin Jabor Al-Thani of Qatar, Deutsche Bank said in a statement. It plans to raise another 6.3 billion euros in a rights issue to existing shareholders.

The Qatari investor has not requested a seat on the board, nor were any special fees offered to the investor, a source close to the transaction said. "They're an investor like anyone else," he said.   Continued...

A logo of Deutsche Bank AG is seen in Tokyo September 9, 2013. REUTERS/Toru Hanai