FRANKFURT - Deutsche Bank said Monday it would raise 2.8 billion euros ($3.7 billion) by issuing new shares, a move to bolster its capital buffers in line with new global financial rules.
Germany's largest bank said it would issue some 90 million new shares from authorized capital and place them with institutional investors, without a public offering. It also said it would raise up to 2 billion euros more in non-equity capital over the next 12 months.
The German bank made the announcement it was strengthening its financial reserves as it issued its quarterly earnings statement, released a day ahead of time.
The bank said net income rose 18 per cent to 1.66 billion euros in the first quarter from 1.41 billion euros in the same period a year earlier. Revenues rose 2 per cent to 9.39 billion euros. That beat analysts' expectations for 9.08 billion euros in revenue, according to financial information provider FactSet.
The bank said it had made progress during the quarter with its program to reduce overhead and expenses. It cut general and administrative expenses by 12 per cent to 2.82 billion euros, and compensation and benefits by 3 per cent to 3.55 billion euros. The bank had 3 per cent fewer employees at the end of the quarter than it did a year ago, at 97,794.
Co-CEOs Anshu Jain and Juergen Fitschen said the quarterly figures represented a "robust" performance that "reflects the strength of our franchise in the face of continued regulatory challenges" and savings from cost cuts.
New global banking rules will require lenders like Deutsche Bank to have higher capital buffers to protect them against market risks and avoid the need for more expensive bailouts, such as those that occurred during the 2008 financial crisis.
Deutsche Bank has sought to increase its capital ratio — the size of its financial reserves compared against its risky loans and investments — but has lagged other large global banks.
It had been doing that by writing down the value of some of its risky investments — 1.9 billion euros in the fourth quarter of last year. It has put many of these troubled investments in a separate unit to manage their disposal.
A bank can increase its capital buffers either through raising capital by selling new shares or exiting risky investments and holdings. The riskier an investment, loan or security held by the bank is considered, the more capital must be kept back to protect against losses on it.
At the time Jain said that Deutsche Bank's efforts so far to increase its capital ratio were the equivalent of raising 8 billion euros in new capital. Investors often don't like capital increases because they can dilute their holdings.
Regulators worldwide are pressing banks to raise more capital to strengthen their finances to avoid a repeat of the 2007-2009 financial crisis.