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Deutsche Bank (DB -1.4%) is preparing a capital raise of up to €3B this summer, according...
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Thursday, April 19, 2012, 11:13 AM ETDeutsche Bank (DB -1.4%) is preparing a capital raise of up to €3B this summer, according to sources. The move is aimed at stemming criticism of its high leverage ratio (towering over that of U.S. banking giants), and prepping for introduction of Basel III rules.
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Before market close yesterday, we saw Deutsche Bank shares start to drop, due to the breaking news they are expected to sell approx. 3 Bil Euros in shares to meet Tier 1 Capital requirements as ordered by the EBA, to meet the Basel III CRD.
Their plan for recap has been rejected twice since it's first submission in March 2012.
Now, anyone that knows me, will tell you I am a strong proponent of the Deutsche Bank short, and here's why:
Deutsche Bank's self outing of their MASSIVE legal problems drove price down recently, hence the news in today's WSJ regards the 3 Bil Euro stock sale to raise capital, but they will force shares lower in doing so.
As I wrote yesterday, with Deutsche Bank owing the FED $354 Bil USD, they have few choices left, and finally has their turn in the barrel.
Deutsche Bank is currently leveraged @ 60:1 on a TCE/assets basis, and t its Basel “risk-weighted” assets are only $450 billion, but actual balance sheet assets are $3 Trillion, so......... in other words, due to the Basel standards, (which count sovereign and other AAA assets as risk free), Deutsche Bank has $2.5 trillion of assets with zero capital backing.
Another fact that has prompted an inquiry from EBA.
It was reported in April 2011, that Deutsche Bank is actually holding 1.6 Trillion Euros IN DEBT ALONE, (this was before Markets tanked in July - August 2011, and Deutsche Bank lost half (50%) of it's share price, and half (50%) of it's Market Cap), so imagine how bad it is now, they need to double to back to zero (0).
Why is this important?
Because the rating agencies, STILL REFUSE to drop Deutsche Bank to a D Rating. They have an "Overall Financial Health" Rating of "C+" since August 2011 from Moody's. This fact alone should for the agencies to drop Germany's AAA rating as well, with their strongest bank in the toilet.
Check the breaking news about the EC/EU, EBA, SEC, all having Deutsche Bank under their microscope right now regards these latest reports of MASSIVE legal troubles, .....AND the fact they changed their entire Board out 4 weeks ago unexpectedly.
People laugh about it, but the EBA can swoop down on ANY EU Bank and seize them without prior notice, write that down, you will see and hear it again.
EBA acts under direct European Supervisory Authority granted by the EC/EU.