Deutsche Bank, seeking to raise $11.6bn of capital, braced investors for a deepening trading slump and potential damage to its business from international probes of currency rigging and hiring practices.
'A challenging market environment' means the investment-banking division may post a larger year-over-year drop in revenue this quarter than in the first three months, when it fell 10%, the firm wrote in documents released Thursday for the stock sale. And the foreign-exchange inquiries have potential to result in “significant financial penalties and other consequences,” it said.
Bloomberg News reports that Deutsche Bank is looking to strengthen its finances as clients hold off on trades and capital is siphoned by mounting costs from inquiries, lawsuits and tighter regulation. The firm Thursday said it’s offering investors $9.2bn of new shares, the main part of a package to raise $11.6bn.
The stock sale 'should bring some calm to the constant concern the bank is weakly capitalized as it deals with its litigation bills', said Ingo Frommen, an analyst at Landesbank Baden-Wuerttemberg who raised his recommendation for the stock to buy from hold. 'The share sale will be successful unless there’s some kind of extreme negative macroeconomic event'.
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