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Report: Deutsche Bank may lower 13% CET1 ratio target to avoid capital raise


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According to Market Intelligence, April 2023

Report: Deutsche Bank may lower 13% CET1 ratio target to avoid capital raise

Deutsche Bank AG is considering reducing its 13% common equity Tier 1 capital ratio target as a way to free up capital for its ongoing restructuring, rather than raising funds from the market, Handelsblatt reported May 28, citing two sources with knowledge of the matter.

A capital increase was temporarily considered as an option, but management is confident it could avoid that as the cost reduction at the bank is progressing faster than expected, according to the report.

Deutsche Bank may be in a position to reduce its CET1 ratio target as it has a bigger buffer over its current minimum regulatory requirement of 11.82%, according to Handelsblatt. Its first-quarter CET1 ratio was 13.7%.

Whether a target cut would work at Deutsche Bank will depend on the currently ongoing targeted review of internal models, or TRIM, by the European Central Bank, which could potentially raise the minimum requirement for the group.

The hope at Deutsche is that the TRIM exercise will not have a big impact on the requirement and will result in a small increase of between 0.2 and 0.4 percentage points in its CET1 ratio minimum requirement, Handelsblatt reported.

Another key factor that could enable Deutsche to forgo a capital raise is the restructuring of its investment bank.

At Deutsche's annual general meeting May 23, CEO Christian Sewing spoke of possible "tough cutbacks" in the investment banking unit as the group aims to boost profitability.