Bloomberg News

UniCredit, Deutsche Bank May Need Most Capital, JPMorgan Says

October 19, 2011

Oct. 19 (Bloomberg) -- UniCredit SpA and Deutsche Bank AG may have the biggest shortfall in capital among European banks should stricter regulations be passed and they incur sovereign debt losses, according to JPMorgan Chase & Co.

Milan-based UniCredit would need to raise 13.5 billion euros ($18.7 billion) assuming a “stress” scenario and Germany’s Deutsche Bank would need 11.7 billion euros, JPMorgan analysts led by Kian Abouhossein wrote in a note to clients today.

European banks may need a total of 230 billion euros to recapitalize in 2012, they said. Using the European Banking Authority’s calculation method, the amount of capital required would be 243 billion euros, according to JPMorgan.

“The more we look at the details, we question EBA input assumptions and hence we remain cautious,” the analysts said. “Overall we believe the JPMorgan methodology is more realistic.”

The analysts said they used calculations based on the so- called Basel III reforms for capital ratios and assumed banks with a capital deficit will cease paying dividends, among other changes.

Using the EBA’s assumptions, Royal Bank of Scotland Group Plc has the largest shortfall at 19 billion euros, followed by UniCredit with 17 billion euros needed, JPMorgan said.

--Editors: Stephen Taylor, Jon Menon

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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