Deutsche Bank Demands Investor Patience With Dividend Suspension
Deutsche Bank says it can realise its revamp without a capital increase that would dilute existing stakes further.
(Bloomberg) -- Deutsche Bank AG is putting investor loyalty to the test with a sweeping overhaul that will mean no dividends and billions of euros in charges over the next two years.
The bank plans to emerge as a more agile, focused version of itself by shuttering equities trading and concentrating on being a resource for German corporations. But to get there, its going to have to take about 7.4 billion euros ($8.3 billion) in charges and post net losses for the second quarter.
Deutsche Bank says it can realize its revamp without a capital increase that would dilute existing stakes further. Chief Executive Officer Christian Sewing is dangling better returns in the future, promising to return 5 billion euros to shareholders through dividends and buybacks “starting in 2022.”
“Deutsche Bank will look to fund its transformation within its existing resources” and without raising fresh capital, the bank said in a statement Sunday. “As a consequence, Deutsche Bank does not plan to pay” a share dividend for 2019 and 2020, it said.
Deutsche Bank’s share price is slightly up this year but it’s still not far from an all-time low hit just last month. Asking shareholders for fresh money to finance to get rid of businesses the bank no longer wants would be extremely difficult.
Instead, Sewing is tapping into the bank’s capital cushion to fund what he’s billed as the bank’s biggest restructuring in decades -- which means he needs to be strategic with the little financial resources he can generate. It will be the first time since at least 1993 that Deutsche Bank won’t pay out.
“Our shareholders have supported our bank’s restructuring for years,” Chairman Paul Achleitner said in the statement. “That’s why a substantial return of capital over time is an important part of our new strategy.”
Deutsche Bank has raised about 30 billion euros from shareholders since 2010. The share price had fallen by more than 80% over that period.
To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen
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