Monday used to mean mergers. Now it seems to mean “capital raising”.
While Hbos looked poised to become the next UK bank to tap investors for cash, Germany’s banks were also in the spotlight.
A report over the weekend in Der Spiegel posited that Deutsche Bank would ask its shareholders to approve plans to raise €17bn. The paper’s look at an AGM agenda suggests that Deutsche will be seeking permission to issue new shares worth €4bn, in addition to a €4bn share sale approved two years ago. Another €9bn could be raised through issuing participation rights and bonds, it said.
But this is not another beleaguered bank looking to bolster its ailing balance sheet. Well not entirely.
Deutsche may be about to post its first quarterly loss in five years, say Bloomberg, with a €2.5bn writedown already flagged. But that looks rather well-contained as losses at other European banks escalate. Deutsche has been actively selling off its book of stuck leveraged loans, with two circa-€5bn sales as the corporate credit market improved. The bank also, apparently, got a full price for its loans by offering private equity buyers low-cost financing for the deals. The structure of the sales was designed so that Deutsche could avoid booking losses on the loans, and would be protected from further falls in value.
So what’s the new slab of capital needed for then? Deutsche Bank has got its eye on acquisitions. Last week, the bank expressed an interest in picking up parts of Citi’s European business, were they to come up for sale as part of the US bank’s review.
This week, Deutsche is apparently intent on putting its position as a credit crunch survivor to good use in consolidating in Europe. Reuters at the weekend quoted Juergen Fitschen, head of German retail banking at Deutsche, saying he would favour deals among Germany’s four big commercials banks to form two larger groups that could better compete internationally.
So it’s mix and match between Deutsche, Allianz’s Dresdner, Commerzbank and Deutsche Postbank. The former pair were in the frame as the buyers in this hypothetical German realignment.
Some faint prospect then of a return to the old meaning of Monday: deals, not desperate measures.
Related links
Deutsche prepares another big sell-off - FT.com
Deutsche interested in Citi’s German unit - Bloomberg
