Deutsche bank bosses woo shareholders ahead of capital increase

Frankfurt (Reuters) – Before the billion-euro capital increase, Deutsche Bank CEOs Anshu Jain and Jurgen Fitschen are urgently appealing to shareholders for trust and patience.

At the halfway point of "Strategy 2015+," Germany's largest financial institution is on track, they stressed at the annual general meeting on Thursday. Jain, who was interrupted by opponents of capitalism after just the first sentence of his speech in Frankfurt's Festhalle, also admitted: "Some of the challenges were bigger than we expected."

The Indian-born Jain, who together with Fitschen has been at the helm of the Group since June 2012, once again delivered his speech in German. But the 4800 shareholders gave him only sparse applause. Since this week, it has become clear that Deutsche Bank will not achieve its most important return and savings targets until 2016 at the earliest, one year later than previously targeted. Priority is given to bolstering the capital base, which is thin compared with the rest of the sector. That's why Jain and Fitschen are now pushing the third major capital increase in four years and want to raise a total of eight billion euros. In addition, a sheikh from Qatar is joining as a major investor.

Fitschen painted a rosy picture of the bank's future as it seeks to regain a foothold in its high-risk core investment banking business, saying, "We want to establish your Deutsche Bank in a very small global top group that will shape a new era in the banking industry."Some major shareholders, however, have doubts, such as the Union Investment fund company, which is one of the bank's top 10 investors, according to Thomson Reuters data. "There is a huge gap between aspiration and reality," grumbles fund manager Ingo Speich. "Measured by its stock market value, Deutsche Bank ranks only 44th in the banking sector worldwide." The stock's three-quarter plunge since the financial crisis is disappointing, he said. Now investors have to put up with further dilution. On Thursday, the share was hardly changed at 30.20 euros.

Speich described the size and timing of the capital increase as surprising. "If top management had a better reputation, they probably would have gotten by with less. We miss a clear line and reliable communication when it comes to capital management."While confidence in the bank's management has suffered, he said he is confident that Supervisory Board Chairman Paul Achleitner has initiated important changes in the group.

Achleitner is the powerful guardian of the "cultural change" proclaimed by the bank. Windy deals that scratch the reputation of the financial institution should no longer exist, according to official statements. The Austrian emphasized to the shareholders that he was not only looking closely at the progress the bank was making in achieving its goals, but also at how this was being done. But implementing the new culture takes time. "This path can only be covered step by step. There can and will be no shortcuts."

Klaus Nieding of the DSW shareholders' association does not yet believe that the bank has undergone a "cultural change. Because this also includes absolute openness in dealing with the legal disputes from the financial crisis. But that's exactly what he misses. "Deutsche Bank today is a gigantic legal department with an affiliated banking business." The institution has paid or set aside billions to settle lawsuits. Among other things, this involves suspected cheating on reference interest rates and foreign exchange rates as well as questionable mortgage transactions in the USA.

Additional reporters: Alexander Hubner, Thomas Atkins and Arno Schutze, edited by Philipp Halstrick. If you have any questions, please contact the editorial team on 069-7565 1231 or 030-2888 5168.