Deutsche Bank and Credit Suisse may have to raise more capital because of the need to resolve U.S. claims over the sale of mortgage-backed securities before the financial crisis, Barclays said as it downgraded the two banks.
Bloomberg News reports that Deutsche Bank may face settlement payments of as much as $4.5bn, while Credit Suisse may have to pay $2bn, Jeremy Sigee, Kiri Vijayarajah and Thomas Klocanas wrote in a note to investors Thursday.
The banks are “well below” their Common Equity Tier 1 targets and “struggling to build,” the analysts said. “The fear for equity investors is that litigation settlements could increase the likelihood of capital raising moves.”
They lowered the banks to equal weight from overweight and cut price targets for the stocks.
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