Scandal-plagued Deutsche Bank seeking to raise €8 billion through sale of new shares
Deutsche Bank has announced the sale of 687.5 million new shares in a bid to raise €8 billion and return the bank to profitability after continued losses stemming from the financial crisis. The shares will be sold for €11.65 each, a 35% discount on last week’s closing price, and marks the latest in a series of measures taken by CEO John Cryan aimed at rebuilding trust in the German lender.
Last December, Deutsche Bank reached a deal with the U.S Justice department to pay a fine of $7.2 billion in compensation for the sale of toxic mortgage-backed securities that led to the collapse of the housing market and triggered the financial crash of 2008.
In January, Deutsche was hit with another fine of $425 million to be paid to the New York State Department of Financial Services following an investigation into money laundering in Russia. Investigators found that senior bank executives in Moscow created unnecessary overseas stock trades solely for the purpose of disguising the transfer of around $10 billion in laundered money to London and New York between 2011 and 2015.
And two years ago, the bank was forced to pay $2.5 billion to UK and US authorities for its role in the Libor scandal, a scheme to manipulate benchmark interest rates.
At a news conference in February Mr Cryan apologised for the bank’s misdeeds and said that managers’ bonuses would be cut. Also slated to go are around 9,000 of the bank’s 100,000 staff with the closure 200 branches in Germany as Mr Cryan seeks to achieve €3 billion in cost cuts over the next four years.
In 2016 the bank posted an annual loss of €1.4 billion compared to a loss of €6.4 billion the previous year. However, after a decade of ultra-low interest rates and stringent banking regulations, shares in Deutsche have been rising along with the rest of the market in response to the election of Donald Trump, who has promised to create jobs and cut red-tape in the financial markets.
In an interview with Bloomberg Mr Cryan said: “The operating environment in the U.S. but also increasingly in the Eurozone and especially in Germany looks strong. And so I’m reasonably confident about the future.” Mr Cryan predicted that Deutsche Bank would return to “modest…controlled growth” in 2017.