LONDON — Deutsche Bank will tap the markets for €8 billion (£6.9 billion, $US8.5 billion) and overhaul its structure as part of a strategy reset — to return the bank to profitability.
Germany’s largest lender will also sell assets and float a stake in its asset management business on the stock exchange to earn an extra €2 billion.
As part of the plan, Deutsche Bank is streamlining its business model into three units: the corporate and investment bank, wealth management and asset management.
The lender’s corporate finance, global markets and global transaction banking will unify into the corporate and investment bank, pivoting away from hedge fund clients towards Europe’s biggest companies.
CEO John Cryan said: “The capital increase will reinforce our financial strength substantially. The new three-pillar structure of our operating business should position us for significant growth, both in revenues and earnings.”
The overhaul will cost €2 billion in a one-off severance and restructuring payment, but shrink the annual cost base from €24.1 billion in 2016 to €21 billion in 2021 and raise the bank’s capital ratio — a measure of its ability to weather losses — to 13%.
Deutsche Bank’s capital position has been a point of concern for regulators and investors, as well as its ability to operate profitably and pay large fines in a world of sluggish economic growth and record low interest rates.
In December, the bank said it would pay $US7.2 billion to the US Department of Justice, related to its issuance and underwriting of residential mortgage-backed securities (RMBS) and other activities between 2005 and 2007. This capital raise will mark the fourth time the bank has come to the market since 2010.
Deutsche Bank posted a loss of €1.4 billion (£1.2 billion) for 2016, citing restructuring and “negative news flow” around the fine from the US Department of Justice.
To conserve cash, the bank cut its bonus pool for 2016 performance by 80% — a move which will affect around 25,000 senior employees.
The overhaul will also see change at the top for senior managers.
Jeffrey Urwin, the current head of the corporate and investment bank, as well as the US business, will retire. Cryan will take on the responsibility for the US, while CFO Marcus Schenck will join Garth Ritchie as co-heads of the new corporate and investment bank.
Schenk and Christian Sewing, CEO of Germany, have both been appointed deputy CEOs “with immediate effect,” the bank said.
Paul Achleitner, chairman of the supervisory board, said: “After the difficult restructuring of recent years, the Supervisory Board is convinced that these strategic, financial and personnel measures provide a firm foundation for sustainable growth.”