Deutsche Bank Spurrs AT1 Demand With 7.125% Bond Issue Amid Gold Push

Deutsche Bank AG is preparing to issue a new Additional Tier 1 (AT1) bond, signaling its confidence in the robust demand for junior bank debt in the current market environment. The German lender is targeting a benchmark-sized euro-denominated issue, first callable from late October 2034, with an initial coupon of 7.125% according to reports. This move follows a successful $1.73 billion AT1 issuance earlier this year, which attracted over €10 billion in investor orders.

The bank has historically been a key barometer for investor sentiment in the AT1 market, and its latest offering is seen as a strategic step to bolster its capital base amid a broader trend of capital-raising by global lenders. This comes as U.S. and European regulatory shifts, including potential deregulation, are expected to free up trillions in capital for banks, with Jefferies estimating up to $2.6 trillion in capital release by 2026.

Deutsche Bank's decision to raise more capital aligns with its broader strategic shift toward strengthening its balance sheet and pursuing high-growth areas, including a return to the gold trading market. The bank has already reaped substantial trading profits from the precious metals sector, posting over $100 million in revenue in the first half of 2025.

A Strategic Pivot Toward Gold Trading

Deutsche Bank's return to the gold market represents a significant shift in its business strategy. The bank has submitted an application to become a market maker for the London Bullion Market Association (LBMA), a move that would grant it a central role in setting prices for precious metals in the world's largest gold trading hub. To secure this status, the bank must first complete a probationary period, during which it will need to provide two-way price quotes for the metals it trades according to reports.

Deutsche Bank's reentry into the gold market has already positioned it among the top earners in the sector, trailing only major players like JPMorgan Chase & Co and HSBC Holdings Plc. This resurgence coincides with a broader industry boom driven by rising investor demand and the potential for the metal to deliver its best annual performance since 1979.

Risks and Competitive Pressures

Despite the bullish outlook for gold and the strong investor appetite for Deutsche Bank's AT1 bonds, the bank faces several risks that could affect its capital strategy. One of the key concerns is the global private credit market, which is facing growing headwinds, including rising default rates and regulatory uncertainties. Deutsche Bank's asset management arm, DWS, recently cut its private credit team in Asia due to structural challenges in the region, including a fragmented legal framework and limited regulatory transparency.

The move underscores a broader retreat from certain high-risk markets and highlights the bank's strategic focus on more stable and liquid asset classes. While DWS remains committed to alternative investments in Asia, it is shifting resources toward distributing global private credit and real estate strategies rather than originating new deals according to reports.

At the same time, Deutsche Bank is navigating a competitive landscape where other major banks are also positioning themselves for growth in the gold and private credit markets. Citigroup Inc. and Morgan Stanley are among the institutions vying to become clearing members of the London gold market, a sign of the sector's increasing importance in global finance.

What This Means for Investors

The bank's dual strategy—raising capital through AT1 bonds while expanding into gold trading—presents both opportunities and risks for investors. The successful pricing of its AT1 issue at 7.125% indicates strong investor confidence in the bank's ability to deploy capital effectively, particularly in higher-margin businesses like commodities trading.

However, investors must also remain cautious about the broader economic environment. Deutsche Bank's recent downgrade of European chemical stocks and its warning of a prolonged downturn in the sector highlight the bank's sensitivity to macroeconomic trends. The bank has also expressed concerns about the UK's upcoming Autumn Budget, forecasting one of the largest tax-raising packages since World War II.

For now, Deutsche Bank appears to be positioning itself for a period of capital strength and strategic repositioning. Whether this strategy translates into sustained profitability for the bank will depend on its ability to navigate regulatory shifts, economic uncertainty, and the evolving dynamics of the global capital markets.