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Deutsche to pocket $3.4B
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March 18, 1999: 8:28 a.m. ET
German bank boosts coffers for Bankers Trust but denies French link
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LONDON (CNNfn) - Deutsche Bank will issue six billion marks ($3.37 billion) in new equity to fund its purchase of Bankers Trust and other acquisitions in Europe, but is staying away from the three-way merger fray in France.
Rolf Breuer, head of Deutsche's (FDBK) supervisory board, told its annual results meeting Thursday that it had not been invited by BNP (PBNP) to participate in the hostile bid for Société Générale (PGLE) and Paribas (PPM).
Breuer said that while Deutsche "had many friends in France" he would be "amazed" if BNP sought partners outside France. "Outside help, assistance or participation will not play a crucial role in what's going on in France," he said. Dresdner Bank (FDRB) has also been mooted as a partner for BNP's bid.
The comments diluted speculation that Deutsche was preparing a war chest for a ground-breaking deal. The capital increase, scheduled for April, is far higher than originally planned, with the balance of the $10.1 billion Bankers Trust deal expected to be financed from cash and a bond issue.
The bank has announced a 45 billion mark sale of its industrial holdings portfolio, and analysts believe it may be seeking to delay disposing of assets cheaply while the outlook for the German economy remains weak.
The bank's shares were little changed, recovering from early weakness to trade at 51.3 euros after opening the day at 51.6 euros.
Deutsche said 1998 net profit rose to 3.376 billion marks from 1.019 billion in 1997, though last year's figure included a 3.2 billion mark special dividend from its 22 percent stake in Daimler-Benz, paid before the auto maker's merger with Chrysler.
Analysts were disappointed by the small rise in operating earnings to 4.4 billion marks, which reflected the bank's heavy exposure to Asian and central European emerging markets. Deutsche Bank has already accepted the Russian government's settlement on sovereign debt which offers creditors around three cents on the dollar.
On a positive note, traders said final loan-loss provisions for 1998 were slightly lower than expected, and commission income climbed 16.6 percent. Deutsche has faced stiff competition for senior staff and this week lost 10 senior London-based traders to Lehman Brothers.
While Breuer contends a BNP tie is not on the agenda, analysts believe he will not park the funds from the capital increase. Deutsche is expected to continue its policy of small-scale acquisitions, which include a small retail presence in the French market and the purchase of Crédit Lyonnais' Belgian operation.
Deutsche is the last of Germany's four largest banks to announce final 1998 results.
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