Deutsche Bank AG cut its planned debt issuance for 2023 after funding costs went up in the wake of a banking crisis last month.
(Bloomberg) — Deutsche Bank AG cut its planned debt issuance for 2023 after funding costs went up in the wake of a banking crisis last month.
The Frankfurt-based bank lowered its planned issuance to €12 billion to €15 billion ($13.2 billion to $16.5 billion) for the year, from an original issuance plan of €13 billion to €18 billion, according to slides dated Friday from a conference call for fixed-income investors.
Europe’s primary market stalled for a few days in March amid the turmoil from the banking crisis.
“We haven’t really gone to the market since the turbulence started in any meaningful way,” Chief Financial Officer James von Moltke said Thursday on a separate earnings call with analysts.
“The reason is not because we don’t have access to it, but we don’t like the price,” he said. “And pre-funding therefore was I think economically sensible and has actually given us a slightly better funding profile for this year and going into 2024 than we might have otherwise expected.”
Balance sheet flexibility allows the lender to replace senior non-preferred issuance with senior preferred, according to the slides. Senior non-preferred requirements are revised down to €4 billion to €5 billion, of which €4 billion is complete, while senior preferred issuance is revised up to a range of €3 billion to €4 billion, from €1 billion to €2 billion previously. Its “primary focus” will be covered bonds for the rest of the year, the bank said.
Deutsche Bank’s year-to-date issuance of €8 billion is already more than half of its full-year target. The lender doesn’t plan further Additional Tier 1 or Tier 2 issuance this year, having already issued $1.5 billion of Tier 2 debt in February, completing that particular 2023 capital instrument issuance plan, according to the slides.
“We are in a good place on our funding plan for this year,” von Moltke said Thursday. “So we feel overall very constructive about where we stand and our hope and expectation is spreads will narrow again in the coming months.”
The bank yesterday announced plans to cut about 800 senior back-office staff alongside first-quarter earnings that showed revenue from fixed-income trading slumped 17%. The decline was offset by a 35% jump in revenue at the corporate bank, allowing the lender to post its strongest top line since 2016.
–With assistance from Paul Cohen.
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