Deutsche Bank on hunt for €5bn as US fine looms large

It’s possible they’ll have to stump up as much as $14 billion but there is good news – finally – arriving...

Deutsche Bank on hunt for €5bn as US fine looms large

Tony Webster, Flickr

As Deutsche Bank continues to battle a potential $14 billion fine for mortgage bond mis-selling, it is now aiming to raise €5 billion to reinforce its balance sheet.

It is the most Europe’s largest bank could possibly raise without requiring shareholder approval.

The US Department of Justice (DoJ) slapped Deutsche with one of the largest potential bank fines in history last month, though it could still be reduced drastically. Deutsche has insisted that it is financially sound, with talk of state aid being batted away, but German reports are showing that large blue-chip German corporations are willing to inject cash in return for shares.

There have also been suggestions that the bank could spin off its fund management arm to raise funds. Chief executive John Cryan has only gone so far as to say that the division would remain an integral part of the bank, leaving the door open for a partial sale. Cryan is meeting the DoJ in Washington today to try to move closer to a settlement around Deutsche’s $3bn – $5bn target.

Deutsche has already started cutting costs by reducing its workforce. Another 1,000 job losses were announced yesterday, following on from the 3,000 people already let go in Germany. It looks likely that 15,000 employees (of a total 101,000-strong workforce) will be made redundant overall.

Sentiment towards Deutsche is improving, however, with shares recovering to over €12.10, up from a low of €9.90 last week. Reuters has also reported that Qatar investors – who own the largest stake in the bank – won’t sell Deutsche shares, and would be open to buying more if it opts to raise capital.

Christine Lagarde, managing director for the International Monetary Fund (IMF), yesterday called on Deutsche to move away from a “dated business model” that’s reliant on a large asset base and find “the right re-architecture”.