* Barclays needs to raise 12.8 bln stg, taps investors for
* Deutsche has earmarked 250 bln euros of assets that could
* Investors fear more banks will need to raise capital
* UBS draws a line under its 2008 bailout with fund buyback
By Steve Slater and Edward Taylor
LONDON/FRANKFURT, July 30 A $9 billion rights
issue and a fresh purge of assets are among the measures
Britain's Barclays and Germany's Deutsche Bank announced on
Tuesday to meet tougher rules on risk, raising concern among
investors that regulators will push other European banks into
Unlike their U.S. rivals, which were quickly restructured
and recapitalised in the heat of the financial crisis, Europe's
banks are still trying to extricate themselves from the legacy
of 2007-09, with regulators in Britain and the continent fearful
that some of them are still too big to fail.
"If Barclays needs to raise that much capital, and it was
relatively well capitalised by European standards, it suggests
we've got a long way to go in Europe," said the head of equities
at one UK fund manager.
"We'll see this creep in Europe, moving the bar higher and
higher to get to where the regulators want to go, and we've
still got a long way to go in terms of capital raising."
Barclays bore the brunt of a surprise new British
curb on banks' risk exposure, requiring it to raise an extra
12.8 billion pounds of capital in the next year.
To meet the new target, Britain's third-largest bank by
market value said it would tap shareholders for 5.8 billion
pounds, shrink its loan book by 65-80 billion pounds and sell 2
billion pounds' worth of bonds, sending its shares sliding over
Tougher rules on risk discourage banks from lending, and
Britain's business minister last week accused the country's
central bank of holding back economic recovery by imposing
higher capital levels on banks.
In the euro zone, national regulators are pushing banks to
get their houses in order in anticipation of the European
Central Bank taking over direct supervision of the bloc's
largest banks next year.
Deutsche Bank, which has already raised around 5
billion euros in new debt and equity, said it had earmarked an
additional 250 billion euros in assets, roughly equivalent to
the annual economic output of Denmark, that could be cut to meet
new bank safety rules.
Its shares were down 4 percent at 1245 GMT, underperforming
the European banking index, which was down 0.4 percent.
In addition to pressure on capital, European investment
banks are also in the cross-hairs of a number of regulatory
probes including a global investigation into manipulation of
benchmark interest rates and the mis-selling of mortgage-backed
bonds in the United States.
In Frankfurt, Deutsche Bank set aside an extra 630 million
euros to cover claims and settlements, causing it to miss
quarterly profit expectations.
Even when banks settle with regulators, they still face
further lawsuits from other aggrieved parties.
Barclays and Swiss bank UBS, which have already
paid out nearly $2 billion over their role in the manipulation
of benchmark interest rates, were named in a fresh lawsuit by
the city of Philadelphia in connection with the scandal, along
with Deutsche and a host of other banks.
Barclays also set aside another 2 billion pounds to cover
compensation claims arising from mis-sold products in Britain.
UBS BRIGHT SPOT
In one of the few bright spots for European banking on
Tuesday, UBS said it would buy back a fund set up to purge it of
toxic assets during the financial crisis, drawing a line under
its humiliating state bailout in 2008, boosting its capital and
raising the prospect of an early increase in dividends.
UBS beat second quarter profit forecasts despite paying a
$885 million fine to settle a lawsuit with the U.S. housing
regulator over its role in the sale of mortgage-based
UBS's second-quarter performance was driven by buoyant
equity markets. Its decision to pull out of most areas of fixed
income meant that unlike Deutsche Bank it was not hit by a drop
in income from debt trading in the latter part of the second
quarter after the U.S. Federal Reserve signalled an end to cheap
Leaving aside the litigation charge, Deutsche Bank's core
investment bank underperformed U.S. rivals such as Goldman Sachs
and Morgan Stanley. Revenues from Deutsche's investment bank
rose just 9 percent, compared with double-digit jumps on Wall
In Spain, Santander's core capital ratio, a measure
of its capital strength, rose partly due to a reduction in
lending, underlining the risk for regulators that the push for
greater capital levels could further choke the supply of credit
and hurt the wider economy.
Earnings from Santander's flagship Latin American businesses
fell in the first half of the year as lending income from Brazil
faltered, taking the shine off a turnaround in group profits.
Austria's Erste Bank has already met new global
standards for capital and said it was more concerned that growth
return to its core markets in central and eastern Europe.
"We belong to the best capitalised banks in Europe," Chief
Executive Andreas Treichl told a news conference. "All we need
is growth," he said.