By Kit Rees and Danilo Masoni
LONDON (Reuters) - European shares pulled back on Monday with banking stocks led lower by a slump in Deutsche Bank shares after the German heavyweight lender unveiled an 8 billion-euro (6.9 billion-pound) cash call as part of a major reorganisation.
Losses, however, were limited by fresh deal-making activity in the auto and asset management sectors, which helped the STOXX 600 (STOXX) fall just 0.5 percent and stay just over half a percentage point below a 15-month peak hit last week.
Deutsche Bank (DE:DBKGn) dropped nearly 8 percent, making the stock the biggest drag on the pan-European index and pulling the European banking index (SX7P) down 1.2 percent. Peers Credit Suisse (S:CSGN) and Italy's Banco BPM (MI:BAMI) also fell more than 4 percent.
Deutsche Bank, which also announced an overhaul of its business structure and plans to list its asset management arm to help raise extra cash, will start the rights issue in two weeks.
JPMorgan (NYSE:JPM) hailed the new strategic direction taken by the bank as steps "in the right direction", but kept its neutral rating on the stock, saying more details on the financial impact of the planned measures were needed.
PSA Group (PA:PEUP) rose 2.7 percent after the French carmaker agreed to buy Opel from General Motors (N:GM) in a 2.2 billion-euro deal that is expected to generate cost savings of 1.7 billion euros.
The deal will create a regional giant to challenge market leader Volkswagen (DE:VOWG_p), which fell 0.8 percent.
Merger activity also buoyed asset managers after Aberdeen (L:ADN) and Standard Life (L:SL) set terms of their planned 11 billion pound all-share tie-up that could pressure rivals to follow suit as industry margins sag.
Aberdeen and Standard Life rose 4.2 and 5.7 percent respectively.
"We see a strong industrial logic for the merger in terms of scale, capabilities and cost savings," said Ben Cohen, analyst at Canaccord Genuity.
"There must also be a reasonable likelihood of a counter-bid, for one or both of the parties, given accelerating consolidation in the industry".
Europe's Basic Resources index (SXPP) was a weak spot, down 2.2 percent, with big miners such as Glencore (L:GLEN), Anglo American (L:AAL) and Antofagasta (L:ANTO) all falling more than 2 percent, tracking a decline in metal prices.
Among outstanding movers was Ultra Electronics (L:ULE), which rose 4.8 percent to a record high after the British defence contractor reported its biggest sales growth in six years.