Deutsche Bank capital-raising rumors swirl as shares push higher

Deutsche Bank possibly seeking capital injection

The chatter surrounding embattled lender Deutsche Bank reached almost deafening volume Friday with various reports of capital raising plans amid renewed confidence in its share price.

A report Thursday in German newspaper Handelsblatt said that the bosses of several of the country's blue-chip companies have discussed the issues at the bank and are readying an offer of capital injection if needed. Meanwhile, Bloomberg also reported that the bank was informal talks with securities firms to explore options on capital-raising.

The perception is that Deutsche Bank needs to raise cash after the U.S. Justice Department (DOJ) suggested it pay $14 billion to settle a number of investigations related to mortgage securities. Initial worries about Deutsche Bank actually surfaced earlier in the year, with investors detailing concerns over its exposure to the energy sector and a possible cash crunch.

The bank has repeatedly defended itself over recent weeks, however, telling CNBC that there is "no reason to worry" and that the bank had a "comfortable cushion."

Deutsche Bank's stock has slid over 46 percent so far this year and the cost of insuring exposure to its debt has risen sharply. It has come under pressure from aggressive short-selling, notably from some large hedge funds. But a report by Reuters on Friday showed a slight reprieve with the news agency saying two large hedge funds are now reducing their "short positions" on the German bank. Shares were modestly higher on Friday morning, up 1.3 percent by around 11 a.m. London time.

The bank announced a further 1,000 job cuts in Germany on Thursday, adding to a strategy that will lead to a total of 9,000 job losses across the world. The Financial Times, meanwhile, said Friday the bank was working on spinning off its asset management business, citing people familiar with the business. Deutsche declined to comment when contacted by CNBC.

Deutsche Bank announces 1000 job cuts

Amid the furor surrounding its capital and the settlement with the DOJ, many top names were on hand to offer their advice to the lender. Christine Lagarde, the managing director at the International Monetary Fund, told Bloomberg on Thursday the bank needed to reform its business model and reach a rapid settlement with U.S. officials.

Elsewhere, Klaus Regling, managing director of the European Stability Mechanism, told CNBC late Thursday the banking union in Europe meant that lenders in the region are stronger today than they were before the global financial crisis of 2008 and the subsequent sovereign debt crisis of 2011.

Manish Singh, head of investment at Crossbridge Capital, believes that Deutsche Bank will have to perform a capital raise to the tune of at least 5 billion euros ($5.5 billion).

"I see the (Deutsche Bank) kerfuffle as a macro issue. Macro guys trying to relive 2008. It's not 2008 for the fact that the bank doesn't have liquidity issues, and the fact that in 2008 the capital markets literally shut down as Lehman and Bear Stearns fear ratcheted," he said in an emailed note to CNBC.

"If (Deutsche), the largest bank of Europe's largest economy, decides to come to market and sell controlling equity (if need be) of 5 billion (euros) or more ... The bid will be enormous," he added.