Deutsche Bank swallows $4 billion of charges for cleanup

Thu Jan 31, 2013 1:58pm EST
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By Edward Taylor and Arno Schuetze

FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE: Quote) plunged to its worst quarterly loss in four years on Thursday after it took nearly $4 billion in charges to try and draw a line under a slew of scandals and boost its balance sheet without asking shareholders for cash.

Shares in Germany's largest lender hit their highest level in nearly a year after it raised its capital levels closer to European peers. But with so much uncertainty surrounding future capital requirements for the industry, a rights issue, which would dilute existing investors, remains a risk, Deutsche said.

"We have been very consistent. We have said we do not believe it is in our shareholders' best interests. We have shown that we are willing to take pain," Co-Chief Executive Anshu Jain told a conference call when asked about a possible rights issue.

"This said, clearly, it is a very uncertain world. There is a plan B. We will not rule out any option that is in the best interest of Deutsche Bank."

With patchy introduction of Basel III global bank capital rules, regulators are increasingly pursuing tougher national regimes to rein in lenders, prompting fears of a regulatory arms race.

"We saw regulators in the world come together in 2009. I am concerned this regulatory cohesion will not last," said Jain.

Deutsche Bank cut its risk-weighted asset (RWA) base by 55 billion euros in the fourth quarter, helping to raise its core tier one capital ratio under Basel III rules to 8 percent at the end of 2012 from under 6 percent at the end of 2011.

RWAs are a bank's assets, usually loans, adjusted for the likelihood of non-payment.   Continued...

A visitor walks past the bank's logo prior to Deutsche Bank's annual news conference in Frankfurt February 2, 2012. REUTERS/Kai Pfaffenbach