Deutsche Bank shares plunge over ‘no state bailout’ re­ports

The Myanmar Times - - International Business -

SHARES in Deutsche Bank, Ger­many’s big­gest lender, sank to a his­toric low af­ter re­ports at the week­end that Ber­lin had re­fused state aid for the em­bat­tled lender.

The shock sell-off saw shares plunge by 7.5 per­cent to end the day at 10.55 eu­ros (US$11.9), drag­ging down Frank­furt’s DAX 30 which closed 2.2pc lower.

“Given the state of the news, peo­ple are sell­ing al­most in a panic,” said Michael Seufert of NordLB bank.

In­vestors were blind­sided by news ear­lier this month that US reg­u­la­tors were seek­ing a $14 bil­lion fine from Deutsche Bank over its ac­tions lead­ing up to the sub­prime mort­gage cri­sis in 2008.

Ger­man news weekly Fo­cus at the week­end re­ported that Chan­cel­lor An­gela Merkel had ruled out any chance of of­fer­ing state aid or in­ter­ced­ing with the US au­thor­i­ties.

An­a­lysts of­fered some crumbs of com­fort for Deutsche watch­ers, with Mr Seufert not­ing “there’s no rea­son at the mo­ment why the bank would have to ask the gov­ern­ment for help”.

Merkel spokesper­son St­ef­fen Seib­ert, mean­while, said there were “no grounds” for re­ports that Deutsche might re­ceive state fund­ing. But the gov­ern­ment would be un­likely to al­low Deutsche to fail in the event of a true cri­sis, An­dreas Uter­mann, chief in­vest­ment of­fi­cer at Al­lianz Global In­vestors, told Bloomberg Tele­vi­sion.

With around $2 tril­lion of as­sets on its bal­ance sheet, Deutsche Bank is “too im­por­tant for the Ger­man econ­omy” for the gov­ern­ment to al­low it to fail, Mr Uter­mann said.

In the near term, in­vestors fear that even if Deutsche ne­go­ti­ates a much lower deal with the US Depart­ment of Jus­tice, the loom­ing fine will still ex­ceed the $5.5 bil­lion the bank has set aside to cover its roughly 8000 open le­gal cases.

A larger fine could force CEO John Cryan into rais­ing more cap­i­tal, po­ten­tially di­lut­ing the value of ex­ist­ing Deutsche Bank shares.

Even once a deal has been reached with the DoJ, Deutsche is still un­der in­ves­ti­ga­tion by the New York Depart­ment of Fi­nan­cial Ser­vices over al­leged money laun­der­ing in the bank’s Rus­sian arm.

Deutsche Bank stock has lost half of its value on the Frank­furt ex­change since Jan­uary, af­ter the lender booked an al­most 7 bil­lion euro loss in 2015.

Photo: AFP

Bro­kers mon­i­tor the stock ex­change in Frank­furt, on Septem­ber 26, af­ter shares in Deutsche Bank, Ger­many’s big­gest lender, hit a record low.

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