Deutsche Bank's Capital Raise, Explained

Shares of Deutsche Bank AG (USA) DB fell more than 4 percent during Friday's trading session after the company confirmed it was preparing to raise approximately 8 billion euros ($8.47 billion) and consider strategic measures.

The German-based bank had a rough 2016 as the U.S. Justice Department was initially seeking $14 billion in fines to settle accusations regarding misselling mortgage-backed securities in the United States. Investors rightfully questioned if the bank was sufficiently capitalized to survive a multi-billion fee and the stock was highly volatile.

Ultimately, Deutsche Bank reached a $5.4 billion settlement with the U.S. government in late September of last year. But the bank announced over the weekend that it will issue 687.5 million new shares to raise the approximate 8 billion euros.

The Details

Deutsche Bank's stock was trading lower by around 1 percent 60 minutes ahead of Monday's opening bell.

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Deutsche Bank noted that upon completion of the capital raise, its pro forma CET1 ratio would be 14.1 percent and its pro forma leverage ratio stands at 4.1 percent.

Deutsche Bank noted that the capital raise is intended to strengthen its status a "leading European bank with a global reach supported by its strong home base in Germany."

As part of the plan, the bank will also retain its Postbank unit which will be integrated with its existing German private and commercial banking and wealth management business.

Also, Deutsche Bank will restructure its existing Global Markets, Corporate Finance and Transaction Banking businesses into one single division, which will be called Corporate & Investment Bank.

Other actions include the reduction of Deutsche Bank's legacy assets pool, sale of a minority stake in Deutsche Asset Management through an IPO within two years and disposing riskier business operations.