March 6, 2017 / 10:00 AM / 2 years ago

Deutsche capital plan puts AT1 par value in sight

LONDON, March 6 (IFR) - Deutsche Bank’s Additional Tier 1 paper spiked on Monday morning, after it revealed a large share sale aimed at putting to bed any concerns over its capital position.

The bank plans raise €8bn of new capital by early April, and added that it intends to reach a Common Equity Tier 1 ratio above 14%, from a previous target of 12.5%.

Among a host of strategic changes, the key message for bond investors was that management has approved payment of AT1 coupons due this year - around €400m.

Deutsche’s €1.75bn of 6% AT1 bonds callable in 2022 were bid at a cash price of 96.10 on Monday morning, a full two points above their starting level, according to Thomson Reuters data.

Concerns over the Deutsche’s ability to pay those coupons triggered a sharp sell-off in AT1 in early 2016, and its own AT1 paper dipped below 70 in October after a potential us$14bn fine from the US Department of Justice was revealed.

Chief executive John Cryan has long resisted calls for a capital raise while he tries to deal with a host of legacy issues at the bank.

Friday’s statement outlined a couple of strategic U-turns.

Postbank will not be sold and will instead be combined with the Private and Commercial Clients business.

Corporate Finance, Global Markets and Global Transaction Banking will be merged into a single Corporate & Investment Bank division, having been carved out as recently as 2015.

CreditSights’ Simon Adamson said in a note published on Monday that while the measures appeared to reflect “muddled thinking” on strategy, the capital impact further supported his market perform recommendation on Deutsche’s bonds.

Reporting by Tom Porter; Editing by Philip Wright

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