Deutsche Bank aims to overcome legal woes
Deutsche Bank, the German lender that's paid more than $9.3 billion in fines and settlements since the financial crisis, expects to resolve the largest of its legal issues by the third quarter of 2016, co-Chief Executive Officer John Cryan said.
"We can never promise it but hopefully they'll be behind us" by mid-year or the thirdquarter, Cryan, 55, said at a conference in Frankfurt on Wednesday. "2016 should be the year when we finish the process of tidying up the bank and be 100 percent focused on what's most important which is our staff engaging with our customers." Cryan, who took over from coCEO Anshu Jain in July, is grappling with litigation and investigations stretching the globe, from probes into its U.S. mortgage-backed securities business to whether its traders colluded to manipulate currency rates. U.S. and U.K. authorities are also investigating suspected money-laundering at the lender's Russian unit, people familiar with the matter have said.
The lender's legal bills have contributed to investors' concerns that Deutsche Bank may struggle to pay coupons on its contingent convertible bonds, known as CoCos. The bank's shares dropped as much as 12 percent Feb. 8, and are down 26 percent this year, while the cost to insure against a default on its subordinated debt has more than doubled.
In a bid to calm the markets, Deutsche Bank on Feb. 9 published Cryan's letter to staff in which he described the company as "rock solid," while signaling that rising legal provisions are already accounted for in the bank's financial plan. The firm also offered buy back about $5.4 billion of senior bonds to help reverse the selloff. "We weren't forceful enough to say we absolutely will make those dividend payments," Cryan said Wednesday. "That set off some nervousness."
Deutsche Bank is "incredibly liquid" with an "absolutely solid" balance sheet, Cryan added on Wednesday. Deutsche Bank has been accused of misdeeds including violating U.S. sanctions and rigging interest-rate benchmarks. Cryan pledged last month to resolve the bank's legal battles as part of a wider overhaul plan.
The bank last week said Germany's financial regulator, Bafin, completed probes into the lender's conduct on multiple cases including interest rate manipulation, Banca Monte dei Paschi di Siena SpA and the trading of precious metals. Bafin cited changes already implemented and further measures to be taken by Deutsche Bank as reasons for its decision.