Deutsche Bank is facing pressure from investors to raise capital amid fears the bank is still not robust enough to cope with a tougher regulatory environment and a slump in global debt markets.
Insiders at Germany’s largest lender are understood to accept as a real threat that European regulators will direct Deutsche to raise fresh equity after euro zone-wide bank health checks later this year.
Other banks, including Barclays and Credit Suisse, have in the past two years been compelled by local regulators to accelerate plans to raise capital. Deutsche is expected to face a stricter oversight regime when the European Central Bank takes over in November.
Some large investors are pushing for executives to raise equity, not least because they fear an aggressive plan to reduce the bank’s outsized debt-load is severely damaging its fixed income trading business.
Reducing assets
Joint chief executive Anshu Jain is trying to build up capital by reducing assets and retaining earnings. A €3 billion equity rise 12 months ago had prompted him to declare the bank's capital "hunger march" over, but since then it has been hit by fresh rules on how much debt a bank may have compared with its equity capital.
Deutsche’s core tier one ratio – a crucial gauge of balance sheet strength – stood at 9.7 per cent at the end of 2013, the third worst among 12 of the world’s largest investment banks, a JPMorgan analyst said.
David Moss, head of European equities at F&C Asset Management, said: “They have improved their capital position dramatically, but for a bank with the size of their balance sheet and their business mix, it still looks to be on the low side.” – Copyright The Financial Times Limited 2014
