BERLIN (The Deal) -- Leading German lender Deutsche Bank (DB) on Monday said it would raise 8 billion euros ($10.96 billion) in cash from investors including Qatar's royal family as it faces a European Central Bank stress test later this year.
Deutsche said it sold 1.75 billion euros worth of new shares to Paramount Services Holdings Ltd., the Qatar family's investment vehicle, at 29.20 euros apiece, a 5.2% discount to the shares' Friday close. That stock issue equates to about 6% of the Frankfurt institution.
The German bank will raise the remaining 6.3 billion euros in a June sale to investors at an as-yet unknown price and led by an unnamed banking consortium
European banks are girding for a fresh round of stress tests this summer to gauge their resistance to financial crisis.
The tests will be conducted by the European Central Bank as it prepares to become the Continent's chief banking supervisor in November and will measure banks against a targeted common Tier 1 capital ratio of 8%, falling to 5.5% in adverse situations. Although the regulator has said it will look at Tier 1 capital, watchdogs are also increasingly considering other factors, such as leverage ratios, because they fear banks have found ways to hide risk while cresting the Tier 1 requirement.
Deutsche said the sale will boost its Tier 1 ratio to 11.8% from 9.5% and also help it hire key new personnel in the U.S., in banking for international corporations and in wealth management, where it wants to grow 15% in the next three years.
Analysts said the share sale, its second-largest ever, wouldn't be enough.
"They won't be able to get up to a leverage ratio of 4% until they raise 13 billion euros. Even then they would only be at the lower end of this key ratio among global investment banks. Their new business goals also sound a bit too lofty," wrote Societe Generale SA analyst Andrew Lim in a note. He has a sell rating on the stock.
Deutsche is also one of a handful of banks being probed for rigging foreign exchange rates. The company said during a call with analysts that the fundraising had little to do with potential legal costs.
"The package of measures we are announcing today represents a decisive response to both the challenges and the opportunities in a changing macro-economic, competitive and regulatory environment. These measures enable Deutsche Bank to position itself for long-term, sustainable success in a time of historic change in the global banking industry," Deutsch co-CEOs Jurgen Fitschen and Anshu Jain said in a statement.
Deutsche said it managed the sale of its shares to Qatar itself.