Deutsche Bank is preparing to launch a new €500 million share buyback program, continuing its effort to return capital to shareholders. The German banking giant said the latest round of share purchases will begin on Tuesday, August 25, shortly after it completed a much larger €1 billion buyback. The move marks another step in the bank’s ongoing capital distribution plans.
Another €500 Million Goes Back to Shareholders
Deutsche Bank announced on Monday that its new share buyback program will begin on Tuesday. The bank plans to purchase as much as €500 million worth of its own shares under the program.
At current exchange rates, the planned buyback is worth about $583.35 million. Reuters reported an exchange rate of $1 to €0.8571 at the time of the announcement.
A share buyback allows a company to purchase some of its own shares from the market. This reduces the number of shares available to investors. For remaining shareholders, that can increase their ownership share of the company, although the ultimate effect depends on factors including the price paid for the shares and the company’s future performance.
New Program Follows a €1 Billion Buyback
The €500 million program comes immediately after Deutsche Bank completed a larger €1 billion share buyback. Together, the two programs represent €1.5 billion in share repurchases.
The quick move from one program to another highlights the scale of Deutsche Bank’s recent capital returns. Rather than ending its repurchases after completing the €1 billion program, the Frankfurt based bank is moving directly into another round.
The new program is half the size of the recently completed buyback, but €500 million still represents a significant amount of capital being directed toward Deutsche Bank shares.
Why Companies Buy Back Their Own Shares
Share buybacks are one way that companies can return excess capital to investors. Instead of distributing all available capital through dividends, a company can use some of its money to purchase shares on the open market.
Reducing the number of outstanding shares can increase earnings per share if profits remain steady. Buybacks can also give companies flexibility because they can be carried out separately from regular dividend payments.
For investors, however, the benefits depend heavily on how much the company pays for its shares. Buying shares at an attractive valuation can create more value for remaining shareholders, while purchasing them at a high valuation can make a buyback less effective.
Deutsche Bank Continues Its Capital Return Push
The latest announcement adds to Deutsche Bank’s broader effort to distribute capital to shareholders after years spent strengthening its finances and restructuring parts of its business.
The new €500 million program also sends a signal that the bank has enough capital available to continue repurchasing shares after finishing its previous €1 billion program.
Investors will now be watching how quickly the new purchases are completed and how Deutsche Bank balances future buybacks with dividends, investment in the business and its other capital requirements.
A New Round of Purchases Begins Tuesday
Deutsche Bank’s latest buyback begins only a short time after the completion of its previous program, putting the bank back into the market for its own shares. With another €500 million set aside for repurchases, Deutsche Bank is continuing to make shareholder returns an important part of its capital strategy. The program begins Tuesday and follows €1 billion of shares already repurchased under the bank’s previous buyback.
