UPDATE 3-Deutsche Bank legal risks cast shadow over rights issue

Thu Jun 5, 2014 11:45am EDT
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* Bank warns of material risks stemming from probes

* Rights issue prices above expectations

* Bank says investment bank results suffered so far in Q2 (Recasts with legal risks)

By Thomas Atkins

FRANKFURT, June 5 (Reuters) - Deutsche Bank warned that potential fines stemming from a range of investigations could threaten its capital base, casting a shadow over an 8.5 billion ($11.6 billion) capital hike that had soundly beaten price expectations.

Deutsche Bank cautioned that performance at its investment bank, its largest division, had weakened in April and May and that potential fines could complicate efforts to comply with regulatory capital minimum requirements.

The warnings came only hours after Germany's largest bank priced its rights issue at a higher than expected 22.50 euros per share, enabling it to raise more capital than anticipated to fortify its regulatory ratios and pay for a restructuring.

In a 500-page prospectus published as part of the issue, Deutsche listed a series of potential threats, saying an ongoing global probe into currency price manipulation and a U.S. probe into financial dealings with Iran posed material risks.

"The increasingly stringent regulatory environment to which Deutsche Bank is subject, coupled with substantial outflows in connection with litigation and enforcement matters, may make it difficult for Deutsche Bank to maintain its capital ratios at levels above those required by regulators or expected in the market," the bank said.   Continued...