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Deutsche Bank Scrambles To Raise Capital: Will Sell €8 Billion In Stock At Up To 30% Discount
Remember this?
This is a chart we have been presenting since last year, updated periodically, showing just how vast Deutsche Bank's potential undercapitalization is/would be if, as in the case of Lehman, for some reason gross exposure suddenly became net, and there was counterparty failure. It is also the reason why we predicted as recently as last month when Deutsche announced it would issue another €1.5 billion in Tier 1 capital, that the German megabank's capital raising is far from over.
Sure enough, just out from Bloomberg:
- Deutsche Bank preparing a capital increase, aims to raise EU8 billion through new shares by end of June, Handelsblatt says, citing unidentified people in the finance industry.
- Deutsche Bank likely to get new single investor
- Negotiations ongoing, haven’t been made final
- Deutsche Bank declined to comment: Handelsblatt
Who will buy the shares?
- Deutsche Bank new investor may hold 5%-8% of shares
Belgium? WSJ adds:
The planned capital increase will consist of Deutsche Bank issuing a total of 360 million new shares, the person said. A single strategic investor has agreed to buy 60 million of the shares with the remainder sold to investors via a so-called rights offering, this person said. The rights offering is fully underwritten, meaning investment banks have agreed to buy any shares that investors don't purchase.
And the punchline: Bank’s new shares may be sold with 25%-30% discount.
In other words, it is liquidity scramble time, and the bank is willing to give anyone with deep enough pockets a 30% discount to market price just to get some additional short-term funding.
Why the scramble, especially if Europe is, as eurocrats, lying central bankers and conflicted pseudo-intellectuals like to claim "fixed?" We can't wait to find out although something tells us that the official version, that "the move is expected to boost a key gauge of the bank's
financial strength, its core Tier 1 level, to at least 11.5% of its
risk-adjusted assets, compared with 9.5% now" is merely the latest lie out of a continent where contrary to intentions, the ECB's annual stress test confirms banks are in worse shape than ever. Which, as Marathon CEO Bruce Richards, who during the SALT Las Vegas conference last week estimated European banks' equity shortfall to be around $800 billion, is perfectly understandable.
Source: Handelsblatt
The official press release from Deutsche Bank:
Deutsche Bank raises capital and reaffirms Strategy 2015+
Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today announced a capital increase with proceeds expected to be approximately EUR 8 billion. The capital increase will include an ex-rights issue of EUR 1.75 billion which has already been placed with an anchor investor and a fully underwritten rights issue. The rights issue is expected to raise EUR 6.3 billon of new equity.
Additionally, Deutsche Bank today reaffirmed its commitment to Strategy 2015+ and is providing updated financial aspirations and further details of an accelerated growth strategy.
Strengthening capital
The capital measures will increase the Common Equity Tier 1 (CET1) ratio by approximately 230 basis points from 9.5% at the end of the first quarter 2014 to 11.8% on a pro forma CRD4 fully-loaded basis. This increase follows significant strengthening of this ratio, which stood below 6% in mid 2012, under Strategy 2015+. These measures will substantially increase the Bank’s capital ratio, provide a buffer for future regulatory requirements, and support targeted business growth.
Deutsche Bank placed approximately 60 million shares at a price of EUR 29.20 per share with Paramount Holdings Services Ltd., an investment vehicle owned and controlled by His Excellency Sheikh Hamad Bin Jassim Bin Jabor Al-Thani of Qatar, who intends to remain an anchor investor in Deutsche Bank.
Additionally, through the rights issue, Deutsche Bank expects to issue up to 300 million new shares. The rights offering will be led by Deutsche Bank as global coordinator and bookrunner. A syndicate of banks have agreed to a firm underwriting of the new shares.
Subject to the approval by the BaFin, a securities prospectus is expected to be published on 5 June 2014. The subscription period is expected to run through 24 June 2014.
Strategy 2015+ updated targets
The Bank reaffirmed its commitment to implementing Strategy 2015+, which has so far generated more than 350 basis points of CET1 capital ratio increase on a pro forma CRD4 fully-loaded basis, some EUR 360 billion of CRD4 exposure reductions, and EUR 2.3 billion of cumulative cost savings from the Bank’s Operational Excellence Programme (OpEx) in less than two years.
The package of measures announced today reinforces Strategy 2015+ by enabling Deutsche Bank to address challenging operating conditions. These include tighter regulatory requirements, the increased cost of compliance and litigation, and headwinds in the macro-economic environment. These measures also enable the Bank to invest in growth opportunities in its core businesses arising from improved dynamics in the competitive environment.
As a result, the Bank is updating its targets as follows:
• Accelerated delivery of target CET1 ratio, to exceed 10% on a pro forma CRD4 fully loaded basis
• Introduction of a leverage ratio target of approximately 3.5% by end of 2015 on a pro forma CDR4 fully-loaded basis
• Reaffirmation of the cumulative OpEx savings target of EUR 4.5 billion by end of 2015
• Updated Group post-tax return on equity (RoE) targets:
- approximately 12% in 2015 adjusted for significant non-operating items
- approximately 12% in 2016 on a reported basis
• Updated Cost Income Ratio targets:
- approximately 65% in 2015 adjusted for significant non-operating items
- approximately 65% in 2016 on a reported basis
• Deutsche Bank aspires to return surplus capital to shareholders – including in the form of competitive dividend payout ratios – in the long-term.
Core business targets for 2015 have been updated as follows:
• Corporate Banking & Securities (CB&S): adjusted post-tax RoE of 13%-15%
• Private & Business Clients (PBC): reported income before income taxes (IBIT) of EUR 2.5-3.0 billion
• Global Transaction Banking (GTB): reported IBIT of EUR 1.6-1.8 billion
• Deutsche Asset & Wealth Management (DeAWM): reported IBIT of approximately EUR 1.7 billion, unchanged from the previous target
An analyst call will take place on Monday, 19 May 2014 at 8.00 a.m. (CET). This conference call will be transmitted via internet: https://www.db.com/ir/en/content/capital_increase_2014.htm
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Looks like crazy uncle Jim Willie was right about this one too. Best $110/6 months I ever spend. Now if he could just throw in some gratuitous Brazilian chicks in thongs in his newsletter, I'd be set.
>> Best $110/6 months I ever spend.
I bet Willie feels the same way.
If you need proof that the market is over priced ... here it is. Also known as a haircut
After selling trillions of $ of gold and silver that don't exist, they are now selling stock to raise cash; nice strategy.
the article makes no sense
if a major bank like DB needs 8 billion units, a central bank simply prints the units
then lends them to DB for a thousand years at zero percent
or buys DB stock
or deposits the units, on behalf of DB, with itself
or whatever
Yes that is true. But then those 8billion would not come from them "muppets". The purpose is to have euro-retirement funds buy those 8 billion that will become worthless notgeld in a few weeks time, therefore giving the socialist elite the much needed alibi for those already confiscated pension funds. Can't have the "muppets" holding anything of REAL value, can we?
Merkel hyperinflation will make Weimar hyperinflation look like a sunny day at Coney Island.
If Merkel hyperinflation is that bad I am going really long in boiled rope. The German culture is not going to let that happen without serious piñata like politicians swing away into the dark night.
Now look how much liquidity has been injected since the crisis. Could have bailed out a thousand lehmans... and well, maybe this is all part of their diabolical plan.
They are going to buy Chuck Schumer's favourite stock - "SPY".
This is plain fucking bad.
There's no getting around this horrible shit show now
This will make the Lehman meltdown look like an ice cube compared to the glacier melt deluge this one will cause soon!
Honestly the Germans are a worrying at times and they will probably end up owning Western Europe (if not already), but I have to respect them for:
- How they have pulled together since the end of WW2 and through the Cold War up to this point.
- Their relatively level-headed approach to politics.
- Being galvanized by a set of extremely unfortunate circumstances and rather than going full retard, managing to keep themselves together.
I mean the people here. The politicians are largely kept at bay by a wary public with a decent memory of past events.
if a major bank like DB needs 8 billion units, a central bank simply prints the units
Yes, the CB can print billions of Euros for DB. The problem with this strategy is DB would be admitting failure. This would require dismissing the executives and would also cause lots of political strife. The way they are going would avoid the premise that DB is about to fail without any hard decisions made in the short term.
"The problem with this strategy is CB would be claiming victory. This would require revolving-dooring the DB executives into government after paying them larger bonuses."
fair enough
had overlooked these outcomes
"
if a major bank like DB needs 8 billion units, a central bank simply prints the units
then lends them to DB for a thousand years at zero percent
or buys DB stock"
I believe the reason is the German Bundesbank is NOT the same as the "esteemed" Federal Reserve Bank for the Elites in the US.
They got a call from Buffet in his bath tub. I didn't even know he spoke German.
Haha, I thought you Krauts were the "master-race" ?
Jim willy's psychotic rantings appear to be valid and correct.
Has anyone herd why the sudden need for increased capital? Counterparty risk management? What trade or exposure went bad? When there is smoke there is fire. This has to be a result of bond and currency volitility. I would expect to see more of this soon.
I suspect they've just simply run out of runway (eg cash). DB's problems have been pretty well known for a long time, and they likely were re-arranging deck chairs -- er, I mean using creative accounting to cover it, and they're at a point where that no longer works. I'm sure it's not a coincidence that they dropped ther seat on the metals exchanges, I wouldn't be suprised if the German auditors got more than a litte freaked out when they say the exposure with no backing, and that some of their claimed collateral was rehypothecated vapor.
As Tyler pointed out, there were stories here a year ago discussing the problems. I and many others here pointed at DB well over a year ago: http://www.zerohedge.com/news/2013-02-21/primary-dealer-cash-shortage#co...
I'm pretty sure you can find mentions of DB being fucked as far as 2-3 years back.
Might be Basel III Liquidity requirements biting them in the ass:
"
Liquidity requirements
Basel III introduced two required liquidity ratios.[6] The "Liquidity Coverage Ratio" was supposed to require a bank to hold sufficient high-quality liquid assets to cover its total net cash outflows over 30 days; the Net Stable Funding Ratio was to require the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress.[7]
"
I'm pretty sure that this is around the time where they have to report.
Haircut! That's a head shave
@greatbeard
so you do not buy anything, in order to avoid gratifying the seller?
>> to avoid gratifying the seller?
Don't read what's not written. I've got no problem with Willie, nor people subscribing to his service. I merely pointed out that Willie most likely appreciates the business. Odd that you few would have a problem with such a simple comment.
Pointless cheap shot, cracker.
just how many trillions does the IMF have tucked away? if they spend it all now on banks and bonds what will they have left for the great reset? I guess it doesn't matter when you can simply instruct those you are saving to print more, give it to us and we will launder it into SDR's: the world is none the wiser and the party goes on!
his prediction is that DB will be broken up.
Whatchu talkin' bout Willis!?
That's what Jim Willie is predicting... DB gets broken up into smaller banks as Germany switches over to the BRICS side of things for their own economic benefit. DB starting the entire sequence would make sense if that's what's going to happen as it gives Germany their excuse to exit the Euro and create a gold-backed currency with Russia and China.
It's just crazy enough to sell!
Why on earth would Russia want a parasitic treacherous germany as an "ally", when this very same germany has betrayed Russia several times in the past and is the hand that moves the right sektor nazi puppets in the Ukraine?
No, Russia will let germany drown in the cesspool the krauts have dug up and filled. Then the cossaks will ride and take over the land.
Rossiya uber doucheland!
So many fallacies in your depiction, I don't have the time and energy to refute them.
Screw you two assholes who don't like gratuitous Brazilian women in thongs.
The NSA trolls must be LGBT friendly.
+1 for brown booties
They wanted men probably.
I'm still trying to find out where this guy found this little hottie to dance on the deskstop...
https://www.youtube.com/watch?v=hXkPR8Qik_0
If memory serves, that is Kate Upton before she put on a few pounds that obliterated her waist.
I'm still trying to find out where this guy found this little hottie to dance on the deskstop...
https://www.youtube.com/watch?v=hXkPR8Qik_0
here it is a jim willie on SD about DB
http://www.youtube.com/watch?v=OvnW-daLwWc
The offering of discounted digital zero's and ones's so Deutsch Bank might receive additional digital zero's and one's which were orignianlly created by the Central Banks of the world on computers which create new......digital zero's and one's.....out of thin air.
Who's says alchemy was fake ?
Who's the new investor? The Fed? through one of it's many proxies?
+1000
nvrmnd, too late
Belgium, duh!
Paging Uncle Warren "the vulture" Buffett...
Come on Warren buy them. Get a ton of warrants and the key to Merkels chasity Belt. What does it matter your prastate cancer will proably kill you before they default and at 84 your Weinersnitzel needs a good warm German home
Dunno if it's him, but it sure sounds like the new shares were created with this investor in mind.
Buffett should take a bath and ponder his purchase of new shares.
Buffett should take a bath in babies blood and ponder his purchase of new shares.
FIFY
he could liquidate his position on BOA and plunk it down on DB..... and have cash left over
Don't you mean Wells Fraudco? I mean Golum Sachs? Just how many of the TBTF/TBTJ scumbag banks is he invested in? The man has sold his soul to Mammon.
But stress tests.
Belgium ?
Belgium = The Fed. See the https://www.google.com/search?q=belgium+treasury+buyer+site%3Azerohedge....
This is great news! I'm sure my life savings I have on deposit @ Dooch Bank are safe and sound now!
As safe as German gold held by the Fed... In other words, you're fooked like the rest os us...
Belgium = The Fed = Belgium = The Fed
Isn't this the definition of money laundering ?
Anyone checked to see if they're imposing any capital controls?
no need to, europeans have 1 MIllions percent trust in the system. Trust me, I live in Europe. Government saves them remember?
"Government saves them..."
Until it can't. Then what?
counterparty issues are the gubbermint's problem
You mean anyone naive enough, short-sighted enough or desperate enough to bet money on this outfit's business model...
I'm guessing the new investor is a Gulf SWF.
My plan - NO debt, cash and Gold in hand. I have warned family and friends in Europe. No guns though, we ain't allowed to hold them.
This will be epic, two of Portugal's banks have to raise capital too.
Bitcoin.
man...you have just put the bat signal in the sky for phonystar....
Trying to figure out which banks to use here when the palace starts to burn down. We're with CGD now and have a food store started, gold/silver in hand, and two deadly weapons at the end of my arms...not sure it will be enough however when the welfare/union mob decide they want their raise at the same time our foreign creditors decide to collect. Portugal is walking dead.
Just get something from the black market.
we gotta look at what their bonds are trading at. maybe pick em up at a discount and get a decent coupon. DB is tbtf.
"DB is tbtf."
Yup.
so, will there soon be new termonolgy?
tbts?
too big to save?
a real question.
:)
Wow, things must be bad if DB is willing to send such a signal that they basically don't know what they are doing and just realized they need that money so desperately and so fast that they are basically willing to take any terms just to get their fix, for one more day. I sense a DB Moment coming (that will make the Lehman Moment look like childs play).
Kinda like trying to hit up a loan shark.
.3 x 8 Billion = $2.4 BILLION! Thats quite the vig.
don't worry, the pension funds will still pay the rigged rate
Trying to sneak it past on a Sunday?
Gold phony paper price Monday - $500
Silver phony paper price Monday - Free.
8B EURO? Sofa change. That's like recycling aluminum cans to deal with your mortgage.
This doesn't inspire confidence, makes one wonder why the FED just didn't print up a backdoor bailout. Of course if the Euro crashes first there will be a flight to dollar "safety", that could keep the $ floating a little while longer. Could also be leverage for the US to herd EU governments in the direction it wants them to go.
In this market, everything's bullish.
What, no rehypothecation to infinity to cover?
Calling Uncle Warren Buffett
especially if he liquidates his position in BOA?
54.7 Trillion derivatives exposure.
The ECB... er thanks, but no thanks, we will pass on that one.
Try Yellen, shit I mean Belgium.
You can't have Capitalism without Capital, and you can't have Capital with out savers, and you can't have savers without people and jobs.
EXCEPT,in the USA. You don't need captial, don't need savers, don't need people with jobs. All you need is a Central Bank that can print as much money as it wants to buy assets which it can turn into Capital.
"EXCEPT,in the USA."
Isn't this in every single country? How is debt over double GDP working for Japan?
But Japan was buying into this Bond Ponzi Sceme big time.
Giving their money to the USA, and then getting thier own money back when they buy the next Bond. If countries had not bought into the US Ponzi Scheme they would of been better off. But seeking Infinite wealth just bought them exponential debt.
8 billion. This is a joke right? Do any of you seriously think "they" will let a TBTF bank fail over 8 billion? 80 billion or 800 billion won't even cause a ripple. "They" have been manipulating everything for 5 years and you think it will all fall apart over 8 billion.
Enron's implosion began with a small capital need when its derivative like off balance sheet structure began to unravel.
Different world. There were some semblance of laws and rules then. Clinton, Rubin and Greenspan finished that off and here we are. Implosions can't happen when the fed will print to save or change/ignore rules.
Point taken, but ever heard of death by a thousand cuts?
Exactly. The system must fail at some point. But it could take many years. Or it could happen tomorrow.
Nah... 8B is just to cover their legal fees for fixing silver
How do sanctions affect a derivative contract? After all, an counterparty being sanctioned by the US shouldn't be held accountable for a derivative contract that is sensitive to USD (currency, oil, etc.). This would unbalance Deutsche's derivative book.
With these big banks over-leveraged 10x,15x, 20x, or even higher, the 'markets' only work while everyone guesses correctly and stays on the 'up elevator'. When one big bank guesses wrong - on stocks, bonds, currencies, etc - things get ugly fast. With the Fed tapering there is a greater chance that one or more banks will jump off the bandwagon and either crush those still on the bandwagon, or get crushed as the wagon rolls on. When that happens, the game is over.
If they had half a brain they'd bundle up bad mortgages into risk/return tranches and sell them to unsuspecting teachers funds as can't lose investements...
Oh, wait.
This isn't news. Was telegraphed weeks ago.
http://www.ft.com/intl/cms/s/0/f35d2c7e-cf5e-11e3-bec6-00144feabdc0.html...
And today's announcement: Qatar is investing.
http://www.ft.com/intl/cms/s/0/2222512e-dea0-11e3-b46b-00144feabdc0.html...
Holy Duetchemdeutchmark Batman...
Just how much of that money was from Bennie Bucks? Fucking all i bet.
A great(?) way to invest in a continuing criminal enterprise, I suppose. The "people" who "invest" in banks are criminals themselves. Yeah, I said it.
So many "!" because words don't mean what they used to. Thanks, Orwell.
None of these derivative contracts will ever be paid if things go upside down.
I just can't believe that DoddFrank didn't completely ban this derivative security business from IB's during this last downturn. /sarc
54 trillion euro in derivatives. What can possibly go wrong?
DEEEEEEEE-Leveraging.
Pass the Orville Redenbacher!!
DB will collapse. (Rather, it has been collapsing and will accelerate.)
This will be the catalyst for the next demolition phase.
I stopped reading Handelsblatt on line when they started seriously censoring comments and excluding them entirely on weekends.
The same with Spiegel online and many other MSM. Comment only what they want to hear. Applaud, everything is fine and dandy.
Neue Zürcher Zeitung is a shame nowadays, too. In contrast to their readers' comments.
They have about $54B in equity, so this $8B raises that about 15%
They have about $1.6T in assets so this $8B raises that about 0.5%
Their $54T derivatives are leveraged to their equity by 987 times.
After this "infusion" their $54T derivatives are leveraged to their equity by 861 times.
Who is this giving more comfortable sleep?
And why is existing equity willing to offer new equity a 30% advantage over them?
I wonder if the EU8 billion will be paid to Belgium for the Belgium buying the US Treasury bills
Is this the precise reason why UST yeilds have been going down for past 1-2 weeks? Kaboom then.
Reminds me of Citi selling a large stake to prince Camel Brain just before the big melt down
Anybody know who are the bookrunners? Die üblichen Verdächtigen, led by GS etc.?
Jim Willie on Deutsch Bank
Let’s talk about Deutsche Bank. It has been teetering on the brink of failure for years, and I’m wondering if this isn’t a setup to bring down that bank in a way that allows the mainstream media to blame the Russians.
Please know that the banking system IS going to fail. There is no way that the banks can avoid this. And, the weakest link in that system is currently Deutsche Bank, and when it goes… the rest of the Too-Big-Too-Fail banks go with it. The big question is whether THIS is the big moment.
Short on DB stocks.
Long on German made nail guns.
The best are Japanese.
"Hi, you've reached Warren's private banking number, if you need more than 5 Billion in cash, are paying more than 7% and have state backing to extract the interest payments from the public leave your name and contact info"
Now that's funny
Armstrong says the banks have been told by the Fed they are not going to be bailed out next time -
only depositers $$ ....
so they better change their models......
So they expect the sheeple to put their money in the banks to be fleeced?
Oh, uh.....
...and the DAX is up! as everything seems to be?
PPT busy over on the DAX and FTSE phut phut chugg chuggs I see!
The LOL part of this is that the sindicate that is going to underwrite 300 million new shares is made up of banks that are themselves insolvent, at least by any real-world definition.
Citation ZH:
"And the punchline: Bank’s new shares may be sold with 25%-30% discount. In other words, it is liquidity scramble time, and the bank is willing to give anyone with deep enough pockets a 30% discount to market price just to get some additional short-term funding."
Hmmm, the origin text in "Handelsblatt" sounds a little bit less spectacular, I translate:
"The new shares will be offered - as usually for increasment of capital in that order - with 25-30 percent discount related to the current market value."
IMO, those who are looking for a catastrophe are looking in the wrong place.
If DB got itself into serious trouble, it would claim (among other things) that a DB failure could bring down the EUR.
Since Merkel supports the EUR above all else (including her own taxpayers), she would arrange for those taxpayers to backstop DB, whether or not the Bundesbank wanted to cooperate.
In fact, if you want a catastrophe, IMO you should look at the US.
In Europe, the bank rescues are disliked but not treated with the visceral hatred shown within the US.
If DB was on the point of failure, it would be politically acceptable for Merkel to appear on TV and announce a full bailout.
IMO this would _no longer_ be acceptable in the US.
If JPM was on the point of failure, my 2c are that Obama would appear on TV to confirm that Joe Public's checking account is backstopped to the FDIC limit (by the US gov even if FDIC has issues) but JPM goes into C11.