FRANKFURT, Nov 7 (Reuters) - Germany’s DZ Bank is on track to earn more than 1 billion euros ($1.3 billion) in 2012 and fulfil new capital rules through retained earnings, unless regulators take a different view on the strength of its capital cushion.
The co-operative lender’s Chief Executive Wolfgang Kirsch told Reuters: ”We still do not know what the capital surcharge is for a national systemically relevant bank like DZ.
“I hope the charge is tailored to individual business models and that it considers the fact that we are embedded in a network.”
Another questionmark for DZ, the umbrella organisation for about 900 cooperative lenders, is whether regulators agree with the Frankfurt-based lender’s view on core capital after it switches from German accounting rules to the internationally recognised IFRS standard beginning 2014.
Under new Basel safety rules, lenders need to have a core Tier One capital ratio of 7 percent by 2019, a threshold which has become tougher to reach since criteria for measuring risky assets were beefed up.
“We are currently in talks with supervisors about which elements of capital will be accepted in the new world. Then we will know if there is a need for capital beyond what is generated through retained earnings,” Kirsch said.
The slowdown in financial markets and the cost of introducing new regulations has already forced the lender to cut 100 jobs out of a total 4,000.
“Cost efficiency is the top priority,” Kirsch said, adding that a further reduction in staff and slimming down of the network can no longer be ruled out.
“There is not a day that goes by when more regulation is (not) put on the table which imposes an additional burden,” Kirsch said, adding: “There is a risk that some areas of banking business will no longer be profitable in future.”
DZ Bank, which reported a profit before tax of 515 million euros in the first half of 2012, continues to expect a full-year result above 1 billion euros, Kirsch said. ($1 = 0.7812 euros) (Reporting by Philipp Halstrick; Writing by Edward Taylor; Editing by David Holmes)