DEUTSCHE Bank (DB) is set to announce the City’s biggest rights issue of the year next week, coinciding with talks to finalise the Basel III banking capital rules.
The German giant has made plans for a share offering worth up to €9bn (£7.4bn), people close to the situation said yesterday, in what would be its first money-raising exercise since the financial crisis.
Deutsche Bank (DB) has previously stated it would only sell more shares to fund an acquisition. The primary goal on this occasion is understood to be smaller retail bank Deutsche Postbank, in which the group already holds a 30 per cent stake.
However, Postbank has a market capitalisation of just €5.7bn, leaving DB free to boost its own capital base with the leftover cash.
While DB passed European stress tests in July, its core Tier 1 capital ratio has fallen from 8.7 per cent in December to 7.5 per cent in June, according to its latest results.
Officials close to the Basel III committee said yesterday the new rules would require all banks to hold between seven and nine per cent in Tier 1 capital, leaving DB near the bottom end of the acceptable range. Deutsche Postbank, which failed the European stress tests in July, also lingers near the danger zone.
Regulators are also considering a proposal to impose an extra capital buffer as part of the new system, said reports yesterday, which would force banks to put aside more capital in times of plenty to protect them from a downturn. This means the Tier 1 minimum could rise as high as 12 per cent if regulators move to stop the economy overheating.
While most UK banks already meet these higher requirements, others including DB and Allied Irish may be forced to boost their capital reserves before the rules come into force as soon as 2012.
Talk of the Basel III rules came as a relief to many banks yesterday, however. Stocks in the UK and Europe hit four-month highs after the rules appeared to be less stringent than feared.
Andreas Zoellinger, co-manager of the BlackRock euro-markets fund, said yesterday: “We think that the Basel III rules will be less harsh for the banking sector than feared six to 12 months ago.”
Finance ministers from 27 countries will meet on Tuesday to approve the package of rules, which will be thrashed out on Sunday by central bank governors including Bank of England head Mervyn King.
A spokesperson for Deutsche Bank declined to comment last night.