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Deutsche Bank (DB) shares gave back earlier gains to trade lower on the session Thursday after the European Central Bank said Germany's biggest lender needed to set aside more cash to absorb potential losses.

The ECB, which is the region's banking regulator, said Deutsche Bank would need a minimum common tier 1 equity ratio, a key metric that essentially pegs the amount of cash a bank needs to have as a buffer against its investors and depositors, of 11.82%, a 1.1% increase from its previous guidance but still some 173 basis points below the bank's 2018 tally of 13.55%.  Setting aside more capital is seen as a safer option for banks, but can also hamper its ability to extend loans and generate earnings at the same time.

"The increase is entirely attributable to the final step of the four-year phase-in of the capital conservation buffer and the (global systemically important banks) buffer which became fully effective on 1 January 2019," Deutsche Bank said. "This requirement sets the level below which Deutsche Bank would be required to calculate a Maximum Distributable Amount (MDA) .... used to determine restrictions on distributions in the form of dividends on CET 1 capital, new variable remuneration and coupon payments to holders of Additional Tier 1 instruments."

Deutsche Bank shares were marked 0.6% lower by late morning in Frankfurt, after having gained around 0.25% in the opening hour of trading, and were last seen changing hands at €7.97 each.

The ECB decision comes amid increasing speculation that the troubled German lender is preparing to merge with its smaller domestic rival, Commerzbank AG ( CRZBY) , in order to create a so-called "national champion" that could both service business lending in Europe's biggest economy while offering a stable deposit base for the region's largest savers.

However, a key adviser to the Germany Finance Ministry was quoted by Reuters earlier Thursday as saying he doesn't see "any economically plausible justification" for a tie-up between the two lenders at this stage.

"Deutsche Bank has just made its first profit in several years and even exceeded its cost targets," Joerg Rochol told the news agency. "One should give the bank and its management time to continue along this path."

Germany's powerful Verdi Union has also said such a tie-up would result in massive job losses, and its leader, Frank Bsirske, who also sits on Deutsche Bank's supervisory board, said last month that merger plans were not the near-term focus of the bank.

Deutsche Bank did post its first full-year profit in four years in 2018, but it also recorded a wider-than-expected fourth quarter loss as revenues in its fixed income trading group slumped 23% to €786 million. Broader investment bank revenues fell 5% to €2.6 billion.

"Our return to profitability shows that Deutsche Bank is on the right track," said CEO Christian Sewing at the time. "Now, our priority is to take the next step. In 2019 we aim not only to save costs but also to make focused investments in growth. We aim to grow profitability substantially through the current year and beyond."

Sewing, who has been under pressure to deliver on the bank's turnaround plans since taking over from the ousted John Cryan in April of last year, declined to comment on speculation that has persistently linked the troubled lender to merger plans with Commerbank.

Deutsche Bank has also been hammered by a series of negative headlines and scandals over the past years, the latest linked to European antitrust regulators charging four regional lenders with taking part in a bond trading cartel that lasted at least seven years.

Last month, Bloomberg reported that Qatar's multi-billion sovereign wealth fund was in "advanced" talks with Deutsche Bank to boost its current holding, estimated at around 6.1%, while noting that the timing of such an increase was uncertain.

Last year, the QIA said it would invest around $10 billion of its $320 fund in German, while the fund's chairman, Sheikh Mohammed bin Abdulrahman Al Thani, hinted last week at the World Economic Forum in Davos that financial services firms could be potential targets.