Deutsche Bank AG, continental Europe’s biggest bank, rose in Frankfurt trading after a report that the company plans to shrink its balance sheet by as much as 20 percent to comply with stricter standards on leverage.
Deutsche Bank advanced as much as 2 percent to 35.79 euros, the highest level in more than a month. The shares climbed 1.7 percent to 35.69 euros at 9:58 a.m., valuing the company at 36.4 billion euros ($47.9 billion).
The bank is aiming to complete the balance sheet reduction by 2015 to meet a 3 percent equity-to-assets ratio requirement, the Financial Times reported, citing unidentified people briefed on the plans. Deutsche Bank is also considering selling at least 6 billion euros of hybrid capital, the FT said. Ronald Weichert, a Frankfurt-based spokesman for the company, declined to comment on the FT report.
“They know they have to do something,” Andreas Plaesier, an analyst at at M.M. Warburg in Hamburg who recommends investors buy Deutsche Bank shares, said by telephone. “The measures the bank has suggested address the issue. They have no problem raising hybrid debt and if that happens, it wouldn’t be too tough on shareholders.”
U.S. and European regulators are increasingly looking at leverage, or the relation of equity to assets, to gauge banks’ financial strength as they seek to prevent a repeat of the 2008 financial crisis. Tighter regulatory requirements risk hurting investor confidence in banks should they decide to withhold dividends or raise capital by issuing more stock.
Deutsche Bank will cut assets by selling a portfolio of loans and securities it deems not to be central to its business as well as lowering cash reserves and making changes to the way derivatives are accounted for, Chief Financial Officer Stefan Krause said earlier this month. Krause said at the time that he couldn’t comment on the size of the reduction.