Deutsche Bank will not ask its shareholders for new capital but instead shrink its balance sheet and cut costs to meet stricter regulations, it said on Tuesday, pleasing investors who pushed the stock up over one percent.
A crash diet involving a 4-billion euro (3.1 billion pounds) restructuring charge and 45 billion euros in planned asset sales by March 2013, is designed to help the German international lender tackle a cyclical and structural downturn in banking.
Tougher regulations force lenders to shore up capital to prevent a repeat of the 2007-8 financial markets crisis.
Deutsche aims to slash annual costs by 4.5 billion euros by 2015 and move 125 billion euros worth of risky assets into a non-core unit that will set out to shed to shed them.
"As a distinct division, the unit will be transparent, fully accountable, and empowered to manage and sell assets in the most efficient manner for the Bank," it said in a statement.
Deutsche Bank shares, which were little changed before the news, traded 1.2 percent higher at 32.23 euros at 1056 GMT as traders pointed to some relief that the lender refrained from raising its capital.
"The main thing is that they will be able to avoid a capital increase," said analyst Heino Ruland of Ruland Research.
In that context, the 4-bllion euro charge was acceptable, he added: "People are looking at the costs and thinking of the saying: 'Better an end to horror than horror without end'."
Global banks are battling to adjust to difficult markets and a set of stricter capital rules dubbed Basel 3.
Japan's biggest brokerage Nomura <8604.T> last week said it will make cuts in its equities and investment banking businesses as it looks to chop $1 billion in costs, with its loss-making European operations taking the biggest hit.
Deutsche Bank also said it aims to deliver a post-tax return on equity (RoE) of at least 12 percent by 2015.
The bank previously defined its main profit target using pre-tax return on equity as its benchmark. In the second quarter, Deutsche's pretax RoE was 6.8 percent.
Raising capital levels has made it tougher for the lender to meet its former target of earning pretax return on equity (RoE) of at least 25 percent.
(Additional reporting by Ludwig Burger; Editing by Alastair Macdonald)