* Bank places 90 million shares at 32.90 euros each
* Says allows it to make acquisitions and win new business
* Could also open door to higher dividend payments
* With other measures, raises core Tier One ratio to 9.5 pct
* Shares up 6 pct, hit highest in two months
By Edward Taylor and Sinead Cruise
FRANKFURT/LONDON, April 30 (Reuters) - Deutsche Bank AG completed a 2.96 billion euros ($3.9 billion) shareissue on Tuesday, quashing lingering worries about its financesand showing renewed appetite among investors for European bankstocks.
Its shares jumped more than 6 percent to their highest insome two months.
The capital increase by Germany's biggest lender bolstersits balance sheet and puts it comfortably in line to meet banksafety rules ahead of a 2019 deadline. It also means it canforge ahead with acquisitions and win new business as rivalsretrench, co-Chief Executive Anshu Jain said.
Tapping shareholders for funds allows banks to plugregulatory capital demands and use their profits to invest inexpansion and for higher dividend payouts, rather than spendingmonths diverting the money for regulatory purposes.
The fact that Deutsche Bank - which placed 90 million sharesat 32.90 euros each - managed to sell its shares without a heftydiscount signalled fresh demand for financial markets stocks,towards which investors had long been wary.
"For Deutsche, there were clear business reasons why theymanaged to raise capital so well. This is a global investmentbank which wants to remain a global investment bank," said JaimeRamos Martin, portfolio manager at Standard Life Investments.
"They needed more capital to support those ambitions becausethe U.S. regulator wanted more capital and European regulatorswere worried that this left domestic operations looking weak.Now they can take on more risk," he said.
Deutsche is among a slew of European banks raising capital,including Russia's second-largest bank VTB andGermany's Commerzbank, as well as Greek and Spanishbanks.
Jain said pressure to narrow the gap with peers inspired themove. "We were asked to raise capital by virtually a unanimousopinion across investors and analysts in June, September andDecember," Jain told analysts on a conference call. "Resolvingthe capital issue had to be our top priority."
Deutsche Bank shares closed up 6.1 percent at 34.91 euros,helping drag the European sector up 0.5 percent.
REGULATOR DEMANDS
Jain had said in January the question of whether Germany'slender needed a capital increase was driven by uncertainty overthe likely burden of future regulation.
Since then the U.S. Federal Reserve Board has renewed callsfor foreign banks operating in the United States to hold as muchcapital as their U.S. counterparts, regardless of how well theiroverseas parent companies are funded.
"Everybody knew they needed to raise some capital and nobodywanted to take a position until they completed their capitalraising," Olivier Lefèvre, a Paris-based European equitiesportfolio manager at Natixis Asset Management, told Reuters.
"With this capital increase, they did a great job, they willclose the discount on the valuation and keep in touch with theirSwiss competitors. The bank seems to be on the road now."
The share sale combined with further measures to sell hybriddebt in the next 12 months will bring Deutsche Bank's core TierOne capital ratio to approximately 9.5 percent from 8.8 percentat the end of March.
By comparison, rival Barclays has a core Tier Oneratio of 8.4 percent, Credit Suisse 8.6 percent, JPMorgan 8.9 percent and Goldman Sachs 9 percent.
Britain's banks have also been told by their regulator theymust plug a 25 billion pound hole in their finances by the endof the year, although the watchdog has said actions alreadytaken should cover half the shortfall.
Yet UK banks are unlikely to go directly to shareholders forextra funds. State-backed Royal Bank of Scotland andLloyds Banking Group for instance would want to avoidsuch a scenario because it would require British taxpayers tofoot at least some of the bill.
Barclays has also pursued alternative means tobolster its capital strength, issuing debt that converts intoequity should it hit trouble. It has issued $4 billion ofcontingent capital debt and may issue $6 billion more. RBS and Lloyds have also asked shareholders for permissionto issue the same kind of debt.
For Deutsche, a higher capital cushion could also open thedoor to higher dividend payments.
"Today we can say that the so-called hunger march is over,"Jain said, referring to investor appetite for more generouspayouts. Germany's biggest bank by market value has keptdividend payments steady at 0.75 euros per share since 2009.
Deutsche said its strengthened balance sheet would allow itto buy up assets and poach market share from rival lenders whoare pulling back. It declined to specify where the market sharegains would come from, but has in the past said it wouldcontinue investing in its investment bank even as rivals likeUBS pull out of fixed income. ($1 = 0.7634 euros) (Additional reporting by Matt Scuffham and Kylie MacLellan inLondon; Editing by David Holmes)
Barclays (BARC)
Lloyds (LLOY)
