Deutsche Bank, Commerzbank, Postbank May Pass Stress Tests
Deutsche Bank AG CEO Josef Ackermann. Photographer: Hannelore Foerster/Bloomberg
July 9 (Bloomberg) -- John Lipsky, first deputy managing editor at the International Monetary Fund, talks about stress tests for European banks. Lipsky, speaking with Francine Lacqua on Bloomberg Television's "InsideTrack," also discusses central bank monetary policies and outlook for financial regulation. (Source: Bloomberg)
Deutsche Bank AG, Commerzbank AG and Deutsche Postbank AG, Germany’s biggest publicly traded banks, will probably pass European stress tests based on preliminary findings, four people briefed on the process said.
The banks are expected to exceed the threshold of a 6 percent Tier 1 ratio under the stress scenario, which assumes an economic slowdown and sovereign-debt losses, said the people, who declined to be identified because the information isn’t official. The lenders are due to submit test results to regulators early next week, they said.
European Union regulators are carrying out stress tests on 91 lenders across the region, including 14 in Germany, that are aimed at reassuring investors that banks have enough capital to withstand a debt default by a European country. Assessments carried out in the U.S. last year found 10 lenders needed to raise $74.6 billion of capital.
“In principle, the stress tests are good news for the banking sector, but there’s been some criticism that the scenarios are too weak,” said Matthias Engelmayer, a Frankfurt- based analyst at Independent Research GmbH. “German political support for the stress tests signaled that the banks would be successful.”
Deutsche Bank, Germany’s biggest bank, rose 0.5 percent to 49.25 euros in Frankfurt trading. Commerzbank, the second- largest, dropped 0.1 percent to 6.29 euros, while Postbank lost 2.6 percent to 23.80 euros.
Earlier Tests
Spokesmen for Deutsche Bank and Commerzbank in Frankfurt, as well as Postbank in Bonn, declined to comment.
Commerzbank and Deutsche Bank had already passed a first round of stress tests organized by the Committee of European Banking Supervisors, people briefed on the results said in June. Those tests examined fewer lenders and didn’t take into account sovereign risks, according to the people. The new round of tests by CEBS examines possible losses on sovereign bonds, including a so-called haircut of about 17 percent on Greek debt, people familiar with the matter said this week.
Deutsche Bank’s Tier 1 capital ratio, a key measure of financial strength, totaled 11.2 percent at the end of March. Commerzbank’s ratio was 10.8 percent and that of Postbank was 7.3 percent, including market risk.
Government Bailout
Commerzbank got an 18.2 billion-euro ($23 billion) government bailout during the financial crisis, including a capital injection of more than 16 billion euros. Deutsche Bank and Postbank didn’t require state aid. Deutsche Bank owns almost 30 percent of Postbank with an option to take control of the retail lender.
EU stress tests assume a 3 percentage-point deviation from the European Commission’s economic forecasts over two years and a deterioration of sovereign debt risk as compared to market prices in early May, according to CEBS. The Commission estimates the EU’s economy will grow by 1 percent this year.
To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Bettinga in Frankfurt at jbettinga@bloomberg.net.
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