* Deutsche Bank to raise 8 bln euros in new capital
* To raise cash via stake sale, 6.7 bln euro rights issue
* Qatari royal family new strategic investor
(Adds Monday's analyst call, Thursday AGM, rivals' capital
By Alexander Hübner and Arno Schuetze
FRANKFURT, May 18 Deutsche Bank
launched plans to raise 8 billion euros ($11 billion) in new
capital on Sunday 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 10.2 billion euros in equity in
2010 and a further 3 billion euros 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 euro zone'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 1.75 billion euros 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 6.3 billion euros 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 200 million euros 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
The bank also aims to expand its wealth management team in
key emerging markets by 15 percent over three years.
The capital measures will increase Deutsche Bank's Common
Equity Tier 1 ratio, a measure of a bank's ability to withstand
stress, by approximately 230 basis points, from 9.5 percent at
the end of the first quarter of 2014 to 11.8 percent.
That is closer to the level already held by rivals such as
UBS, which last posted a CET1 measure of 13.2 percent.
Credit Suisse last posted a ratio of 10.0 percent, which is due
to rise to over 16 percent due to regulatory requirements by
2019. Barclays aims for 11 percent by 2016.
The decision to raise capital came as a "pro-active decision
by the management board," said the source, not due to regulatory
News of the hike comes only four days ahead of Thursday's
planned annual general meeting, where shareholders are likely to
register a mixture of displeasure and grudging acceptance over
the hefty capital increase.
"Deutsche Bank's cap hike will dilute shareholders and make
dividend payments per share shrink. But of course, investors
have anticipated a cap hike at Deutsche Bank for a long time,"
SEB fund manager Juergen Meyer.
The bank also weakened some of the reform targets it had set
out in 2012 as part of a turnaround plan. A post-tax return on
equity of 12 percent will come in 2016, the bank said, one year
later than previously promised.
Likewise, it now says a cost-income ratio of 65 percent
originally envisaged for 2015 will only come in 2016. The ratio
was last measured at 77 percent at end-March.
Until now, Deutsche Bank had targeted a core tier 1 equity
ratio of 10 percent under the Basel III bank rules in their most
stringent form as of March 2015. It had aimed at achieving that
mainly by retaining earnings.
Tapping shareholders for cash represents a clear change in
Deutsche's plans after co-CEO Anshu Jain said in April that the
bank "would not rule out any option" to strengthen its capital
As early as January, the bank said it had not discussed
raising equity since raising 3 billion euros ($4.15 billion)
from shareholders last year.
Deutsche Bank itself is the global coordinator and joint
bookrunner on the deal. Other bookrunners include Barclays,
Commerzbank, Banco Santander, Goldman Sachs, JPMorgan and UBS,
sources close to the transaction said.
Deutsche Bank management will unveil more details on the
capital hike and its strategic plans on a conference call with
analysts on Monday at 0500 GMT.
($1 = 0.7297 Euros)
(Additional reporting by Kathrin Jones, Thomas Atkins, Freya
Berry and Simon Jessop; Writing by Andreas Cremer and Alexander
Smith; Editing by Larry King and Cynthia Osterman)