It appears that Deutsche Bank AG (NYSE:DB) (ETR:DBK) is coming to grips with the fact that it will be fined by various regulatory agencies following investigations begun last year into the bank’s role in currency manipulation that has seen over two dozen traders suspended or terminated from the world’s largest banks. Those investigations have not led to any criminal charges yet but internal inquiries have led to those terminations and suspensions.
Citigroup Inc (NYSE:C) is also a bank that stands to lose as those investigations come to a close and has fired a number of its employees as well.
Deutsche Bank: Laundry list of pitfalls
“The extent of Deutsche Bank’s financial exposure to these matters could be material, and Deutsche Bank AG (NYSE:DB) (ETR:DBK)’s reputation may suffer material harm as a result,” the bank said on Thursday.
This statement came amidst a laundry list of items that could hurt Germany’s largest lender. In addition, to possible fines from currency manipulation, the bank warned of fallout from its decision to raise $11.5 billion in new capital that would dilute the company’s stock and changes in European and United States legislation meant to rein in investment banks. Deutsche Bank AG (NYSE:DB) (ETR:DBK) is also being investigated for its role in the manipulation of benchmark interest rates around the world its dealings with countries sanctioned by the United States government.
While Deutsche Bank is likely to escape the penalties that BNP Paribas is looking at for its dealings with Iran and Sudan, it is far from free and clear in its dealings. Many industry insiders expect BNP Paribas SA (EPA:BNP) (OTCMKTS:BNPQY) to face a fine as large as $8 billion in the coming weeks.
“The increasingly stringent regulatory environment to which Deutsche Bank AG (NYSE:DB) (ETR:DBK) 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,” Deutsche Bank said on Thursday.
Speaking of the aforementioned regulatory investigations, the bank added that they “have the potential to result in the imposition of significant financial penalties and other consequences for the bank.”
Qatari bailout and dilution
Deutsche Bank AG (NYSE:DB) (ETR:DBK) is under increasing pressure to increase its capital on hand and become less dependent on practices deemed risk in the future. To that end, Deutsche Bank reached out to the Qatari royal family earlier this month for that capital infusion and announced that the investment vehicle owned by the family bought shares amounting to 1.75 billion euros or $2.4 billion.
In addition to those funds from Paramount Holdings Services the bank plans to raise an additional €6.75 billion through a rights offering that will conclude in the next few weeks that will of course dilute value of shares held by existing investors.