Deutsche Bank unveils record capital hike to buy Postbank
Germany's leading bank, Deutsche Bank, unveiled a record capital increase Sunday, saying it would raise around 10 billion euros to take over German retail bank Postbank.
The operation would seek to raise "at least 9.8 billion euros" (12.5 billion dollars), the bank said in a statement.
Industry sources told AFP it was the biggest rights issue yet for Deutsche Bank, and the second biggest in German history.
"Through this capital increase, Deutsche Bank intends to secure the equity capital required for a planned consolidation of Postbank," Deutsche Bank chief executive Josef Ackermann said in a statement.
"As a result, we can expand our strong position in our home market, take a leading position in the European retail banking business and significantly enhance Deutsche Bank's revenue mix" from a present focus on investment banking, he added.
"Furthermore, with this capital increase we are strengthening the bank's equity capital in light of expected regulatory changes."
Barclays Capital economist Thorsten Polleit told AFP: "German banks have a particularly pronounced need for fresh equity capital" as central banks and regulators prepare new rules on capital requirements in Basel, Switzerland.
Deutsche Bank currently owns almost one third of the equity in Postbank, which has Germany's largest retail banking network, and which will also need fresh capital to meet so-called Basel III regulations.
The statement said Deutsche Bank would offer Postbank shareholders a price of between 24 and 25 euros per share for their holdings.
The final minimum price would be set in about one week by Germany's Federal Supervisory Authority BaFin, the bank said.
The news that Germany's biggest bank sought to raise capital came as markets braced for news from Basel, where global central banks and regulators worked on a new framework aimed at preventing a repeat of the global financial crisis.
Commercial banks could have to significantly increase capital reserves that underpin lending to the wider economy, and possibly add an additional buffer, which some warn could curb the credit available to fuel an uncertain recovery.
Bankers in France and Germany have estimated the Basel III rules may force them to raise some 255 billion euros, and banks might have to compete with governments if everyone tries to tap capital markets at the same time.
According to observers, Deutsche Bank wanted to tap capital markets before other banks did to get the best deal.
"The idea is more banks will come to the market sooner or later," Polleit said. "Being quick may ensure a good price" for the bank's equity.
The size of the offering suggests its main aim is to reinforce Deutsche Bank's capital and help the financial giant pull ahead of weaker German rivals, the Financial Times said on Friday.
"For the German banking system as a whole I think they will be desperate in terms of raising new equity capital," Polleit told AFP.
Many state-owned German banks cannot seek funds on private markets, while cash-strapped regional governments may not be in a position to provide lots of money either.
Rumours of Deutsche Bank's move on Friday pushed its shares sharply lower as traders worried about what it meant for the firm's equity position and the effect of the capital increase on existing shareholdings.
Shares in Postbank went the other way.
Deutsche Bank has scheduled a news conference and analyst call on the announcement for Monday at 9:30 am (0730 GMT).
© 2010 AFP