Deutsche to raise €10 bln to swallow Postbank

Germany's leading financial outfit, Deutsche Bank, announced the largest rights issue in its history Sunday, saying it would raise around €10 billion ($13 billion) to take over retail bank Postbank.

Deutsche to raise €10 bln to swallow Postbank

The issue would be “at least €9.8 billion,” the bank said in a statement.

Industry sources told AFP it was the biggest rights issue ever for Deutsche Bank, and the second biggest in German history.

“Through this capital increase, Deutsche Bank intends to secure the equity capital required for a planned consolidation of Postbank,” Deutsche Bank chief executive Josef Ackermann said in a statement.

“As a result, we can expand our strong position in our home market, take a leading position in the European retail banking business and significantly enhance Deutsche Bank’s revenue mix,” he added. “Furthermore, with this capital increase we are strengthening the bank’s equity capital in light of expected regulatory changes.”

Deutsche Bank currently owns almost one third of the equity in Postbank, which has Germany’s largest retail banking network.

The statement said Deutsche Bank would offer Postbank shareholders a price of between €24 and €25 per share for their holdings.

The final minimum price would be set in about one week by Germany’s Federal Supervisory Authority BaFin, the firm said.

The news that Germany’s biggest bank was seeking to bolster its capital came as leading central bankers and financial regulators met in Basel to hammer out a new framework aimed at preventing a repeat of the global financial crisis.

Banks could have to significantly increase capital reserves that underpin lending to the wider economy, and possibly add an additional buffer, which some bankers warn could curb the amount of credit available to fuel an uncertain recovery.

According to media reports, Deutsche Bank wants to tap capital markets before other banks do to bolster their equity positions in response to the so-called Basel III requirements.

The size of the offering suggests its main aim is to reinforce capital at Deutsche Bank and help the financial giant pull ahead of its weaker German rivals, the Financial Times said on Friday.

Bankers in France and Germany have estimated the new rules may require them to raise some €255 billion, and banks could find themselves in competition with governments if everyone tries to tap capital markets at the same time.

Rumours of the move on Friday sent its shares sharply lower in Frankfurt as traders worried about what it meant for the firm’s capital reserves and the effect of the rights issues on existing shareholdings. Shares in Postbank went the other way.

Deutsche Bank said it would hold a news conference and analyst call on the announcement at 9:30 am on Monday (0730 GMT).

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German watchdog steps up monitoring of popular N26 online bank

Germany's financial watchdog on Wednesday ordered online bank N26 to step up "internal controls and safeguards" to prevent money laundering and terrorist financing, and said it was appointing a special representative to monitor progress.

German watchdog steps up monitoring of popular N26 online bank
An N26 card. Photo: Wikimedia Commons

Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.

“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.

N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.

A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.

Its rapid growth has rested in part on fast-track identity procedures for new customers.

READ ALSO: What is the digital German bank N26 that’s about to hit a million users?

In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.

N26 on Wednesday pledged to “work closely” with Bafin and the special representative.

It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.

The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.