Deutsche Bank AG (DBK) fell the most in more than five months after Goldman Sachs (GS) Group Inc. cut the company to sell from hold, saying it may have to transfer $13 billion to its U.S. unit because of new capital rules.
Deutsche Bank slid as much as 6.2 percent, the biggest intraday drop since Sept. 26, and declined 4.3 percent to 33.57 euros at the 5:45 p.m. close in Frankfurt. The stricter requirements may hurt profit at Europe’s biggest bank by assets and require it to ask shareholders for more money, Goldman Sachs analysts including Jernej Omahen said in an e-mailed report from London today.
“Such an intragroup transfer would cause a sharp reduction in Deutsche Bank’s non-U.S. capitalization, which could increase pressure for an external recapitalization,” the analysts wrote. “The proposal is also stringent on funding, as it calls for a liquidity stress test. The impact on Deutsche Bank’s profit could be substantial.”
The Federal Reserve proposed in November ordering 23 foreign banks to adhere to stricter capital requirements to reduce risks to the financial system. Deutsche Bank co-Chief Executive Officer Anshu Jain said in January he wants his firm to be “very focused on the U.S.” because of its economic prospects and the presence the bank has built there.
Elke Koenig, chief of German regulator Bafin, criticized the U.S. plan yesterday. It was a “unilateral decision” and a “step backward” for international coordination on regulation, she said on the sidelines of a banking conference in Frankfurt.
Deutsche Bank, the least capitalized of Europe’s four biggest investment banks, has narrowed the gap with peers by building reserves without diluting the holdings of its owners with a share sale. Jain told reporters in January that he can’t rule out such a sale should regulation tighten.
Separately, Banca Monte dei Paschi di Siena SpA, the world’s oldest bank which yesterday received a 4.1 billion-euro ($5.3 billion) government bailout, said today that it sued Deutsche Bank and Nomura Holdings Inc. (8604) over two derivatives that soured.
Kathryn Hanes, a spokeswoman for Deutsche Bank in London, said the company had no immediate comment on the case, as did Rob Davies, a spokesman for Nomura.
Goldman’s 12-month price estimate for Deutsche Bank is 37.3 euros, according to the report.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at email@example.com
To contact the editor responsible for this story: Frank Connelly at firstname.lastname@example.org