NEW YORK (TheStreet) - Unless Deutsche Bank (DB) decides to cut its dividend, the banking conglomerate's spending on dividend payments is set to rise even as it raises EUR 8 billion as a means to shore up its financial position.
The obvious contradiction of making significant dividend payments, while simultaneously working to raise new capital underscores the extent that Deutsche Bank has bet it could muddle through the global financial crisis and a bleak economic outlook in Europe.
Muddling through now is almost assured and when the final numbers come out in Deutsche Bank's capital raise, one wonders whether the firm should have approached things differently.
Was the EUR 1.45 billion in dividends Deutsche Bank paid in 2012 and 2013 really worth it? Now the bank will now need to sell 60 million new shares as a means to raise EUR 1.75 billion from Paramount Holdings, an investment vehicle of former Qatari Prime Minister Sheikh Hamad Bin Jassim Bin Jabor Al-Thani.
Is Deutsche Bank's EUR 0.75 cent dividend really worth fighting for at its May 22nd annual shareholder meeting? The bank is looking to sell a further 300 million new shares, raising EUR 6.3 billion, potentially putting total shareholder dilution in the two-part capital raise in excess of 20%.
Was there any benefit to paying dividends far in excess of annual net income in recent years and just as European banking authorities took a tougher line on stress testing and bank capital ratios?