Deutsche Bank AG is weighing a potential capital increase as one of several options under a wider overhaul plan to be presented in the next two months, Bloomberg News reported May 27, citing people with knowledge of the matter.
As part of its new strategy, the Frankfurt-based banking group might need extra cash to fund the substantial cuts it intends to carry out, particularly in its investment banking arm. The division carried €228 billion of risk-weighted assets, or almost two-thirds of the group's total, as of March 31, the report noted.
The group aims to significantly reduce the capital allocated to its trading business, resulting in the division's RWA being removed from its balance sheet and shifted in a separate noncore unit to be wound down. Such a move that could require Deutsche Bank to cough up capital to create and fund the new noncore unit, the sources told Bloomberg.
It took the lender four years to wind down the assets of its last noncore unit, created in 2012 with RWAs amounting to €125 billion. The process led to more than €11 billion in pretax losses over the period, Bloomberg noted.
A cash call is reportedly the least favored option for the bank's management as it could lead to investor backlash due to the bank's low share price. However, CEO Christian Sewing said during the group's recent general meeting that the management is prepared to make "tough cutbacks."
The new plan will also likely entail the departure of some management board members, according to the sources. Garth Richie and Sylvie Matherat, investment banking head and chief regulatory officer, respectively, are said to be the ones likely to leave, having received the lowest shareholder approval during the general meeting.
The plan has reportedly been in the works for some time following the collapse of merger talks between Deutsche Bank and Commerzbank AG. Sewing had also looked at other options such as a more comprehensive strategic revamp, Bloomberg noted.