Deutsche Bank CEO Juergen Fitschen
Deutsche Bank AG (DBK)’s overhaul under its new co-chief executive officers looks set to leave Europe’s largest bank with thinner capital buffers than peers.
Deutsche Bank plans to boost core tier 1 capital to at least 8 percent of assets weighted by risk under Basel III rules by the end of March 2013, and to more than 10 percent two years later, co-CEOs Anshu Jain and Juergen Fitschen said in Frankfurt Tuesday. Its biggest competitors will reach similar levels months or years sooner, based on forecasts from the banks.
Deutsche Bank is winding down assets deemed among its riskiest under rules devised to prevent a repeat of the bank rescues that followed the 2008 collapse of Lehman Brothers Holdings Inc. Jain said Tuesday that while capital concerns have had an effect on the stock, tapping shareholders would be “irresponsible” without pursuing other options first.
“The capital issue has not been addressed adequately,” said Dirk Sebrechts, a Brussel-based fund manager at KBC Asset Management SA. “This is why I would not buy the shares.”
Bloomberg reports tougher rules from the Basel Committee on Banking Supervision, known as Basel III, are forcing lenders to hold more reserves starting in 2013. Banks worldwide will have to hold common equity of at least 7 percent of risk-weighted assets by 2019, and firms deemed systemically important, such as Deutsche Bank, will need more.
Deutsche Bank had the fifth-lowest core tier 1 capital ratio of the 24 biggest European banks by assets under the current rules on June 30, data compiled by Bloomberg show. The goals the bank gave yesterday are for fully applied Basel III standards.
“This is one area that the market will still regard Deutsche Bank as lagging its peers,” Simon Adamson, a London- based analyst at CreditSights, wrote in a note. “It is likely to remain towards the bottom of the peer group.”
In Europe, UBS AG (UBSN) and Credit Suisse Group AG of Zurich, London-based Barclays Plc (BARC) and BNP Paribas SA (BNP) of Paris have all set out forecasts for higher Basel III common equity levels than Deutsche Bank in recent public statements, as has Goldman Sachs Group Inc. of the U.S.
Credit Suisse, Switzerland’s second-biggest bank, announced plans in July to boost capital by 15.3 billion francs ($16.3 billion) this year after the Swiss National Bank urged a “marked increase.” The bank, led by CEO Brady Dougan, aims to boost its Basel III ratio to 8.6 percent by year-end.
Jain, in an interview with Bloomberg Television yesterday, acknowledged Deutsche Bank has lagged behind on capital. He said boosting reserves as planned by next March will put the company “back in the pack,” and the further increase set for 2015 “is the one that will put us where we need to be.”