Deutsche Bank (DB 18.38, -0.65) has given up 3.4% in pre-market after the bank released its latest annual report, which specified the size of the planned share offering.
It is not a secret that 2016 was tough for Deutsche Bank as total assets fell 2.0% mostly due to reduced market values. A shaky start to 2016 set the tone for shares to bottom at a record low of $11.18 in September, before returning near highs ($20.70) from the start of 2016.
The retreat, which accelerated notably in 2016, was brought on by concerns about global growth and questions about Deutsche Bank's ability to withstand associated headwinds, given the bank's considerable holdings of Italian debt.
Although the worries have not been put to rest entirely, they have subsided for the time being, thanks to a combination of factors. A risk rally that followed the US presidential election in November helped lift Deutsche Bank alongside the broader market while the European Central Bank's ongoing quantitative easing program has bought time for Italian lawmakers to tackle the issue of bad loans. The Italian government bailed out Banca Monte dei Paschi di Siena, but the undertaking was not free of issues as the stock plunged immediately after the announcement and trading in shares has been suspended since then.
Given the headwinds faced by Deutsche Bank, it was no surprise that plans to raise EUR8 billion in new capital were announced at the beginning of March. Today, however, investors found out about the terms of the impending sale. Deutsche Bank plans to sell shares at EUR11.65 per share, which represents a 35.0% discount to Friday's closing price.
Deutsche Bank's annual report also revealed that staff bonuses were cut to EUR500 million from EUR2.40 billion in 2015. Total pay for 2016 declined to EUR8.90 billion from EUR10.50 billion in 2015.
In addition to announcing the capital raise, the company updated its annual outlook, calling for revenue during fiscal 2017 to be roughly flat when compared to fiscal year 2016. The bank does expect a pick-up in global growth with global GDP growing 3.5% in 2017 after increasing 3.0% in 2016.
Also of note, The Wall Street Journal reported on Friday evening that Deutsche Bank has tried to entice investors to buy delinquent mortgages by offering favorable lending terms. Deutsche Bank is slated to get credit towards its $7.20 billion settlement with U.S. regulators if the bank assists in buying troubled loans and relief is passed onto the borrower.