* Net profit down 34 pct at 1.1 billion euros
* Investment banking pretax profit down 22 percent
* Core tier one capital ratio 9.5 pct at end-March
* Says EU rules could mean 1.5-2 bln euro capital impact
* Says environment in investment banking challenging
* Shares rise 2.7 percent
(Adds investor comment, updates shares)
By Thomas Atkins
FRANKFURT, April 29 Deutsche Bank
could turn to shareholders for cash to strengthen its capital
base in the face of rising regulatory demands after
first-quarter profits fell by more than a third.
The profit drop coupled with litigation costs, plus the
impact of new European rules to bolster the region's banks have
put pressure on Deutsche's capital, fuelling speculation that
Germany's largest bank will need to raise equity before long.
"We would not rule out any option," the company's co-Chief
Executive Anshu Jain said on a conference call on Tuesday with
analysts following publication of first-quarter results.
Tapping existing shareholders for cash represents a clear
change in Deutsche's plans after it said in January it had not
discussed raising equity since getting 3 billion euros ($4.15
billion) from shareholders last year.
One of the bank's top 20 shareholders, who spoke on
condition of anonymity, said the bank may need to raise as much
as 10 billion euros in fresh equity.
But he urged the bank to wait until later in the year before
returning cap-in-hand to shareholders so that it could offer
more transparency and quantify its exact capital requirements.
"I'd welcome it if I could see what the clear need is," he
said. "I think that at Deutsche Bank there is a capital hike of
around 10 billion already priced in."
Deutsche Bank was not immediately available to respond.
Jon Peace, analyst at Nomura in London, said Deutsche Bank
had clearly made an equity capital hike an available option and
that investors expect an issue worth at least 3 billion euros.
"They're still toward the lower end of their peer group in
terms of regulatory capital," he said.
Chief Financial Officer Stefan Krause said the bank
preferred to retain earnings, sell non-essential assets and use
other so-called organic measures to bolster capital first. But
after that, the door was open to cutting banker bonuses and
dividends and to raising fresh equity, he said.
Krause said bank health checks by European regulators had
made it difficult to quantify capital needs.
The bank said it expected to face a hit of 1.5 to 2.0
billion euros due to new European Union regulations expected to
come into force this year that impose prudent valuation rules on
assets. That effect plus weaker results may complicate the
bank's plans to raise capital through retained profit.
In the first quarter, pretax profit at Deutsche's investment
bank, its biggest division, fell by more than a fifth, dragged
down by a 16 percent year-on-year fall in trading revenue from
fixed income, currencies and commodities.
Revenue declines in trading, especially in bonds, have
already hit investment banking results at Barclays,
JPMorgan and Citi.
Deutsche's net profit in the first quarter fell by 34
percent to 1.1 billion euros as an industry-wide slump in bond
trading revenue depressed results.
The bank repeated its targets for 2015, which call for a
post-tax return on equity (ROE) of over 12 percent for the
group. The bank posted an ROE of 7.9 percent for the quarter.
Deutsche Bank had been expected to post quarterly net profit
of 924 million euros, according to the average of a Reuters
Shares in the bank rose 2.7 percent compared to a 1.9
percent gain in the STOXX Europe 600 bank index. Over
the past 12 months, the shares have held mostly flat while the
index has risen around 18 percent.
($1 = 0.7223 Euros)
(Reporting by Thomas Atkins, Arno Schuetze, and Steve Slater;
Editing by Jane Merriman)