Deutsche Bank AG, Europe’s largest investment bank by revenue, fell as much as 4.5 percent after Barclays Plc analysts cut their rating on the stock, citing fallout from its effort to raise capital as a share of assets.
Deutsche Bank was down 3.2 percent at 35.73 euros by 1:28 p.m. in Frankfurt trading, after Barclays lowered the stock to “equal weight” from “overweight.” The drop exceeded the 1.4 percent decline in the 44-company Bloomberg Europe Banks & Financial Services Index.
Deutsche Bank is addressing calls from regulators and investors to increase capital ratios by shrinking its balance sheet. Anshu Jain, the company’s co-chief executive officer, told reporters this week that the plan has cut revenue in debt trading, a mainstay of his firm’s investment-banking business.
“Deutsche Bank is having a tougher time than anticipated with its deleveraging plan,” London-based Barclays analysts, including Jeremy Sigee, said in a note to clients today. “The fear is that the damage still to come will require further painful adjustment.”
The bank is cutting its balance sheet by 250 billion euros ($338.6 billion), or 16 percent, through next year from its level at the end of June, company filings show.
That reduction, coupled with a plan to sell 5 billion euros of subordinated debt, will boost Deutsche Bank’s capital to 3.6 percent of assets from 3.1 percent at the end of December, Stefan Krause, the bank’s chief financial officer, said at a press conference with Jain this week.
“More asset reduction and/or capital raising seem likely” unless one takes a “very benign” view on Deutsche Bank’s plans to sell subordinated debt, the Barclays analysts wrote.