Deutsche Bank Shrinks its Balance Sheet

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Deutsche Bank said it would significantly shrink its balance sheet to comply with stricter leverage rules as the lender missed analysts’ expectations in the second quarter.

Questions:
1. What are some of the factors on why the bank is shrinking its balance sheet? Be specific.
2. Why have Deutsche Bank’s profits fallen recently?
3. Explain the following statement in simplified terms to a classmate: Deutsche has used a combination of retained earnings, adjustments of risk models and the €2.95bn capital increase to catapult itself from a laggard in capital strength to a bank with one of the highest core tier one capital ratios globally.

Source:
Schaefer, D. (2013). Deutsche Bank to cut balance sheet to comply with leverage rules. Financial Times, July 30 (Retrievable online at http://www.ft.com/intl/cms/s/0/ee53cc58-f8d9-11e2-a6ef-00144feabdc0.html)