Deutsche Bank: share sale details cause price slump

By Euronews

Published on 20/03/2017 - 13:37

Shares of Germany's biggest banks fell sharply in value after it announced details of the sale of new shares needed to increase its capital reserves.

Deutsche Bank’s shares fell sharply down in value on Monday after it announced details of the sale of new shares it needs to make to increase its capital reserves.

Germany’s biggest lender is issuing eight billion euros worth at a steep discount to their price last week.

By the end of Monday’s session the shares were down 3.7 percent.

In recent years the bank has suffered major losses as it paid out billions in settlements for financial misconduct.

Analyst Robert Halver with Baader Bank said the sale was unfortunately necessary: “Selling so many shares for a capital increase is obviously not pleasant but there’s no other way, Deutsche Bank has to raise money in order to move on from its problems. They have to have a clean up and that’s what they are doing. It’s also important for Deutsche Bank, which is very big, to look to the future and make its capital operations functional. So I welcome this capital increase. It has to be done.”

Deutsche Bank sought to reassure investors on Monday saying revenues would be steady this year.

It also reported a strong start to the year in bond trading.

Chief executive John Cryan said the future looked brighter, with economic recovery in Europe and higher interest rates expected.

However this sale of new stock represents a hike of about 50 percent to the number of Deutsche Bank’s shares currently trading.

It puts the bank on course to have raised about 30 billion euros in the last seven years, more than its entire current market value of 25 billion euros.

#DeutscheBank publishes Annual Report 2016 https://t.co/AyGdCvDKze
— Deutsche Bank (@DeutscheBank) March 20, 2017

Compensation down, staff numbers less so

Shareholders are disappointed that Cryan has not come good on promises to cut back on headcount.

Deutsche Bank’s just released annual report showed that while it has brought down compensation levels, staff numbers have fallen little since 2010.

The total fell by 1.3 percent to 99,700 year-on-year in 2016.

The bill for compensation for employees fell by 11 percent to 11.9 billion euros in 2016, a year when it post a net loss of 1.4 billion euros.

Most staff faced cuts to their bonuses while fixed salaries edged up. That is in line with rules imposed by European regulators following the financial crisis as they made an effort to reduce excessive risk-taking by financial organisations.