Deutsche Bank Lower On New CET 1 Capital Requirement

The European Central Bank has lowered the common equity tier 1 (CET1) ratio required for the largest German bank, Deutsche Bank AG (USA) DB. CET1 capital includes common shares of stock, stock surpluses, retained earnings and accumulated other comprehensive income. The CET1 ratio is the ratio of CET1 capital to risk-weighted assets on a bank’s balance sheet.

It's All About The Ratio Balance

Deutsche Bank’s current minimum CET1 ratio is 10.76 percent. The ECB has assigned a new minimum ratio of 9.51 percent beginning in January.

In order for Deutsche Bank to distribute employee bonuses or shareholder dividends, it must maintain a CET1 ratio above the ECB’s threshold.

Deutsche Bank last paid a $0.807 dividend in 2015. The bank then notified shareholders that it would be suspending dividends for two years in an effort to shore up its balance sheet. Starting in 2017, the bank has promised a “competitive payout ratio” in future years.

From 2013 through 2015, Deutsche Bank had a dividend yield of between 1.5 percent and 3.5 percent.

Market Reaction

The market seems disappointed with the ECB’s decision. Deutsche Bank stock was seen down 2.2 in the pre-market session on Tuesday.

The stock is now down 61.8 percent in the past three years. The stock hit a new all-time low of $11.23 in September.