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There Comes A Point When You Just Have To Let Go

06 March 2017 by lberuti

DB ( Deutsche Bank AG ) has finally conceded failure in finding a buyer for Postbank. As a consequence, the German bank has had no alternative but to announce a capital increase that will consist in the issuance of 687.5mln new shares – or €8Bln equivalent - with subscription rights – the subscription period is expected to end on 6th April – and up to €2Bln additional capital accretion targeted over the next 2 years from asset disposals as well as the flotation of a minority stake – up to 30% - in Deutsche Asset Management. The question of sustainable earnings power remains, including a path to improving overall profitability and growing revenue for its revamped trading business, but this operation will help to strengthen its capital and leverage ratios, and to absorb the clean-up of legacy assets. Investors anticipated this breath of fresh air, which follows the US Department of Justice settlement, and drove DB’s 5-year senior risk premium down to 125bps over the last three months - it was another 2.5bps tighter today in an otherwise rather weak market -, bringing it almost back under 100bps - where it used to belong until early 2016 - from a peak of 260bps six months ago.