Deutsche Bank AG may face a capital shortfall of 12.3 billion euros ($16 billion) under a proposal on leverage by the Basel Committee on Banking Supervision, according to JPMorgan Chase & Co.
The Basel proposal, which is designed to include assets that are off banks’ books, would lead to a 33 percent average increase in the balance sheet among the global investment banks tracked by JPMorgan, analysts led by Kian Abouhossein in London wrote in a report to clients today.
Deutsche Bank “needs to raise capital in our view” or reduce assets by 409 billion euros to reach the 3 percent leverage ratio target set by Basel, the analysts said.
Christian Streckert, a spokesman for Frankfurt-based Deutsche Bank, said the company generally doesn’t comment on analyst research notes.
Global regulators are increasingly looking at leverage, in addition to measures based on risk weightings assigned to different assets, to gauge banks’ financial strength. Their focus intensified after some banks improved capital ratios following the financial crisis by altering internal models or cutting risk-weighted assets without correspondingly shrinking their balance sheets.
By the same Basel measure, Barclays Plc, Britain’s third-biggest lender by market value, will have a leverage ratio of 3.5 percent by 2015, the analysts estimated. Still, the bank may also need to raise capital to meet the U.K.’s Prudential Regulation Authority’s leverage requirements, according to JPMorgan. The bank may need 7 billion pounds ($10.6 billion), or a 240 billion-pound asset reduction, the analysts said.
Chief Executive Officer Antony Jenkins said on June 28 the London-based bank may cut lending if the PRA forces the lender to speed up plans to increase its leverage to 3 percent by 2015. A spokesman declined to comment further today.