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.
Tuesday 28, May 2019
(Bloomberg) --Deutsche Bank is considering options including a capital increase as part of a wider overhaul it plans to unveil in the next two months.
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. 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 plan may require the bank to come up with capital to fund the new non-core unit.
Chief Executive Christian Sewing has signalled 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 the CEO, whose previous attempts to lift profitability at the unit have largely foundered.
The lender has raised almost EUR 30 billion ($34 billion) in four capital increases over the past decade. The last time it tapped shareholders was in 2017 when it got EUR 8 billion under then-CEO John Cryan.
Last week, the CEO said that he will not shy away from tough cuts to the investment bank, without specifying where they would occur. Sewing 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.
However, Sewing did not mention the equities business and interest rates trading, suggesting cuts there are probable.
The bank has been working on a Plan B for some time to present to investors after the collapse of merger talks with Commerzbank. Sewing has considered options including accelerated cost cuts as well as a more comprehensive strategic revamp that would result in upfront restructuring costs