(ShareCast) Deutsche Bank considering raising billions of extra capital – report

(ShareCast) Shares in Deutsche Bank have slipped following reports that the bank is considering raising as much as €10bn as part of ongoing merger negotiations with smaller rival Commerzbank.

Sources familiar with the talks were quoted as saying that between €3bn and €10bn of extra capital could be raised by issuing fresh equity. Such a move would help assuage concerns about whether Germany’s biggest lender has enough capital, according to theFinancial Times. The newspaper said that at the end upper end of the range, the capital increase would equal about 40% of the two bank’s combined market capitalisation.

But investors, many of which have yet to be convinced about the economies of a deal, were not convinced, and sent the stock 3% lower by 1230 GMT. Commerzbank was off 2%.

Further depressing the shares was a report by Reuters, which alleged first-quarter trading at Deutsche Bank had been weak. It quoted an unnamed source familiar with the business, who claimed: “January was catastrophic, February was bad and March got slowly better.”

A tie-up between the two banks has long been speculated, and both sides finally confirmed merger talks were underway earlier this month.

Deutsche Bank is a leading player in the global banking sector but in recent years has endured boardroom battles, been fined for failing to prevent money laundering and has seen persistent declines in revenues.

Commerzbank, meanwhile, is seen as vulnerable to foreign takeover, and it is understood there was mounting political pressure for the two banks to consider a tie up.

Deutsche Bank told the FT it was “much too early at this stage of the due diligence process to make a credible assessment if there is any potential capital need at all”.