Deutsche Bank Scrambles To Raise Capital: Will Sell €8 Billion In Stock At Up To 30% Discount

Tyler Durden's picture

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:

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Bernanke'sDaddy's picture

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.

greatbeard's picture

>> Best $110/6 months I ever spend.

I bet Willie feels the same way.

ArkansasAngie's picture

If you need proof that the market is over priced ... here it is.  Also known as a haircut


Pinto Currency's picture


After selling trillions of $ of gold and silver that don't exist, they are now selling stock to raise cash; nice strategy.

SafelyGraze's picture

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

Ahmeexnal's picture

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.

BlindMonkey's picture

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.

SoberOne's picture

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.

flacon's picture

They are going to buy Chuck Schumer's favourite stock - "SPY". 

Headbanger's picture

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!


BrosephStiglitz's picture

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. 

Vampyroteuthis infernalis's picture

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.

SafelyGraze's picture

"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

newbie vampire's picture


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.

Redneck Hippy's picture

They got a call from Buffet in his bath tub.  I didn't even know he spoke German.

vmromk's picture

Haha, I thought you Krauts were the "master-race" ?

maskone909's picture

Jim willy's psychotic rantings appear to be valid and correct.

maskone909's picture

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.

seek's picture

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:

I'm pretty sure you can find mentions of DB being fucked as far as 2-3 years back.


dracos_ghost's picture

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.

Fuh Querada's picture

so you do not buy anything, in order to avoid gratifying the seller?

greatbeard's picture

>> 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.

Treason Season's picture

Pointless cheap shot, cracker.

ZH Snob's picture

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!

Fuh Querada's picture

his prediction is that DB will be broken up.

SilverIsMoney's picture

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!

Ahmeexnal's picture

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!

Fuh Querada's picture

So many fallacies in your depiction, I don't have the time and energy to refute them.

Bernanke'sDaddy's picture

Screw you two assholes who don't like gratuitous Brazilian women in thongs.

813kml's picture

The NSA trolls must be LGBT friendly.

+1 for brown booties

OceanX's picture

I'm still trying to find out where this guy found this little hottie to dance on the deskstop...

MisterMousePotato's picture

If memory serves, that is Kate Upton before she put on a few pounds that obliterated her waist.

OceanX's picture

I'm still trying to find out where this guy found this little hottie to dance on the deskstop...

Jumbotron's picture

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 zero's and one's.....out of thin air.

Who's says alchemy was fake ?


hairball48's picture

Who's the new investor? The Fed? through one of it's many proxies?


Squid Viscous's picture

Paging Uncle Warren "the vulture" Buffett...

remain calm's picture

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

Georgia_Boy's picture

Dunno if it's him, but it sure sounds like the new shares were created with this investor in mind.

Osmium's picture

Buffett should take a bath and ponder his purchase of new shares.

Colonel Klink's picture

Buffett should take a bath in babies blood and ponder his purchase of new shares.


oklaboy's picture

he could liquidate his position on BOA and plunk it down on DB..... and have cash left over

Colonel Klink's picture

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.