Deutsche Bank AG (DB) stock fell sharply in Frankfurt Monday after Europe's biggest bank confirmed it will raise around €8 billion ($8.5 billion) in capital from shareholders and plan the partial sale of its asset management business.
Deutsche Bank shares fell more than 7%, or €1.37, in early trading before paring the loss to around 5.5% and were changing hands at €18.20 each by 08:30. GMT. The stock, however, has been one of the best performing bank shares in Europe in the second half of 2016, rising more than 78% from its all-time low in September and gaining more than 38% since the U.S. elections in November compared to a 12.18% advance for the Stoxx 600 Europe Banks Index.
"We had been listening to feedback from the market that we still didn't have enough capital," CEO John Cryan told CNBC Europe television when asked for the rationale behind the timing of the capital raising. "We had a big buffer over regulatory minimum, but our costs of (debt and equity) capital were still quite high."
"Also, we'd been thinking about what to do with PostBank, and we needed equity it we wanted to retain it," he added. "The two came together and it seemed like the right time to do it."
Germany's largest lender will sell around 687.5 million new shares in a plan that, if approved by the country's regulator, will begin on March 21 and run through April 6. The new shares will be sold at a discount of around 29% to Friday's €19.25 closing price, but Cryan defended the seemingly steep discount.