Deutsche Bank set for early move in dash for cash

Deutsche Bank is set to lead rivals raising billions of euros as radical new global capital rules to be unveiled this weekend bite, and showed it may be good to get the jump on the pack.

Germany's top lender is considering a capital increase of up to 9 billion euros ($11.4 billion) to bolster its balance sheet as Basel III capital requirements are finalized, two people familiar with the matter said on Thursday.

A big cashcall would allow Deutsche Bank to raise its stake in Deutsche Postbank, in which it already owns just under 30 percent, and recapitalize that business, but is also seen as a move to tap markets before rivals who may also need to raise funds once new capital rules are agreed.

More German banks are expected to follow. The 10 biggest may need 105 billion euros in fresh capital under the new capital rules, the German Banking Association has said.

National Bank of Greece also launched a rights issue this week, and more lenders in Greece, Spain, Portugal and Italy could tap investors for funds, analysts estimate.

"This reinforces worries about the health of European financial institutes," Veysel Taze, analyst at Close Brothers Seydler, said.

The timing of the capital increase was uncertain but could come as soon as next week, one of the sources said. Deutsche Bank declined to comment.

Deutsche Bank shares were down 4.8 percent at 47.63 euros by 0731 GMT, and the news tugged Europe's bank sector 0.7 percent lower on fears more banks will follow with a dilutive fundraising. France's Credit Agricole seen as another candidate to raise funds, dipped 1.8 percent.

The new capital rules -- dubbed Basel III -- to make banks resilient enough to cope with another financial crisis are due to be laid out on Sunday after international regulators worked out a compromise deal to put to central banks and supervisors.

Banks will need to have a minimum core Tier 1 capital ratio of 7 to 9 percent, including a capital conservation buffer, officials and regulatory sources have said.

That would include a minimum base core Tier 1 capital ratio of 4.5 to 6 percent and an additional capital conservation buffer of 2 to 3 percent. Any bank that fails to keep above the buffer would have to curb payouts such as bonuses and dividends.

Deutsche Bank's core Tier 1 capital ratio -- a key measure of a bank's ability to absorb shocks -- was 7.5 percent at the end of June.

Economists warn that a greater risk than more fundraising by banks is that lenders will limit lending to comply with the new rules and stifle a fragile economic recovery.

Yet regulators are confident that the new requirements will improve financial system stability without hurting lending.

European corporate credit default swap spreads edged wider, especially for financials, making it more expensive to insure firms against the risk of default.

The Markit senior and subordinated financial indexes were about 2 basis points and 3 basis points wider respectively, BGC Partners said.

[Source: Reuters, Frankfurt and London, 10Sep10]

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