Sell Deutsche Bank Calls on Capital `Pressure,' Citigroup Says

By Alexis Xydias

June 27 (Bloomberg) -- Investors in Deutsche Bank AG should create and sell call options on the shares because the stock is likely to dip in the next three months as pressure grows on the German bank to raise money, Citigroup Inc. analysts said.

In a report today, Citigroup London-based analysts Jeremy Sigee, Kiri Vijayarajah and Stuart MacDonnell, recommended selling Sept. 19 calls on Deutsche Bank with a strike price of 58 euros. The shares closed at 57.16 euros yesterday.

Calls give holders the right to buy a stock at a given price and date. Selling a call is a bet the stock won't rise enough by a specific date to make exercising the contract profitable.

Shares in Fortis, Belgium's biggest financial-services company, tumbled 19 percent yesterday after the company sold new shares worth 1.5 billion euros ($2.36 billion) as the earnings outlook deteriorates.

``Moves by Fortis to raise capital suggest growing pressure for over-leveraged banks to re-build capital ratios through equity issuance,'' the analysts wrote. ``We expect this to increase the prospects that regulators, rating agencies and investors intensify pressure on Deutsche Bank to raise capital.''

Citigroup has a ``sell'' recommendation on Deutsche Bank shares and a price estimate of 68 euros.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.