Deutsche Bank Faces Highest Capital Requirement After Fed Stress Test

Deutsche Bank USA faces the highest capital requirement among major banks due to the Federal Reserve's stress test results. Analysts have set an average one-year price target of $37.81, indicating a potential upside of 7.63%. However, GuruFocus estimates suggest a considerable downside risk based on the GF Value metric, with a potential loss of 47.14%.

The Federal Reserve Board has announced the final individual capital requirements for large banks, effective October 1, following its latest stress test. Deutsche Bank USA (DB) USA leads the list with the highest stress capital buffer requirement of 16.0%, significantly higher than the minimum capital requirement of 4.5% for all banks [1]. This announcement comes as a result of the Fed's annual stress-test exercise, which assesses how large banks would perform under hypothetical economic conditions.

The new capital requirements aim to enhance the resilience of the banking sector, ensuring banks can withstand potential losses and maintain stability in the financial system. Other notable common equity tier 1 (CET1) capital requirements include Citigroup (C) at 11.6%, JPMorgan Chase (JPM) at 11.5%, Goldman Sachs (GS) at 10.9%, Bank of America (BAC) at 10.0%, UBS (UBS) at 9.7%, and HSBC (HSBC) North American Holdings at 9.6% [1].

The Federal Reserve proposed in April to average stress test results over two consecutive years to reduce year-over-year volatility in capital requirements. If this rule is finalized, the 2024 and 2025 stress test results will be averaged, and updated capital requirements will be published separately [1]. Morgan Stanley has requested a reduction in its capital requirements and is currently under review by the Federal Reserve. The Board expects to make a decision and publish Morgan Stanley's final individual capital requirement by September 30, 2025 [3].

Institutional investors now own 27.90% of Deutsche Bank's stock, indicating increased interest from large financial entities. Despite a revenue of $9.21 billion for the last quarter, Deutsche Bank's earnings per share fell short of analysts' estimates, reporting $0.54 against a consensus of $0.78 [2]. Analysts have set an average one-year price target of $37.81, indicating a potential upside of 7.63%. However, GuruFocus estimates suggest a considerable downside risk based on the GF Value metric, with a potential loss of 47.14% [2].

References:
[1] https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250829a.htm
[2] https://seekingalpha.com/news/4490581-fed-declares-individual-capital-requirements-for-large-banks-db-usa-tops-list
[3] https://www.bloomberg.com/news/articles/2025-08-29/morgan-stanley-asks-federal-reserve-to-cut-capital-requirement