Deutsche Bank turns to Qatar as problems continue to mount
Deutsche Bank has launched plans to raise €8bn in new capital – with the Qatari royal family a major new investor – in a bid by Germany's largest bank to end questions about its capital strength.
The bank had already raised €10.2bn in equity in 2010 and a further €3bn in 2013, but that was not enough to assuage investor concerns about its capital position as it faces increased regulatory demands.
The cash injection gives Deutsche the firepower to expand investment banking, especially in the United States, after a retreat by competitors Barclays, UBS and others left a gap that Deutsche aims to fill.
"It was either an up or out moment. Either we had to affirm our strategy and reinforce it, or we had to consider the alternatives," said a source close to the transaction. "To us the alternatives have never been attractive."
The new money also helps the bank build up its regulatory ratios as the European Central Bank runs the region's top banks through rigorous checks before it becomes the eurozone's leading banking regulator in November.
But it underscores how the bank fell short of its ambitious turnaround targets and how burdensome fines and settlements and lagging profitability hampered management's efforts to fortify capital by retaining earnings.
A stake worth €1.75bn has already been placed with an investment vehicle owned and controlled by Sheikh Hamad Bin Jassim Bin Jabor Al-Thani of Qatar, Deutsche Bank said in a statement.
It plans to raise another €6.3bn in a rights issue to existing shareholders.
The Qatari investor has not requested a seat on the board, nor were any special fees offered to the investor, a source close to the transaction said.
"They're an investor like anyone else," he said.
Deutsche Bank said it would focus on an "accelerated growth programme" by hiring top bankers in the United States, investing some €200m over three years on technology improvements to its retail operations in Germany and Europe, and will hire up to 100 advisers to support its biggest corporate clients.
The bank also aims to expand its wealth management team in key emerging markets by 15pc over three years.