Warning as bank shares plunge

Troubled Deutsche Bank must put market at ease, says exchange chief

The money markets are “playing with dynamite” by driving down Deutsche Bank’s share price, the chief executive of the Berlin stock exchange has warned.

Artur Fischer blamed a disconnect between perception and reality for the dramatic plunge in the bank’s share value.

Asked on BBC Radio 4’s World At One if the markets were playing with fire, Mr Fischer said: “Definitely. You could say playing with dynamite.”

As share prices in the troubled bank continued to tumble, Mr Fischer said: “The market bets that the German government will do a bailout even though there is no need for that at this point in time at all.

“We have a disconnect between perception and reality.

“Reality is what you have in the balance sheet of Deutsche ... they have three times as much capital than what the share value is, so the reality is actually much better than the perception.

“But the perception at the end counts, so people act on perception.

“Deutsche will have to come up with some good news. The market has to be put at ease.”

The bank’s shares plummeted to fresh lows yesterday as chief executive John Cryan moved to reassure investors over its health.

The collapse follows reports that 10 hedge funds had reduced their exposure to the lender and have taken their business elsewhere.

The news spooked investors, who have continued a dramatic sell-off that was triggered by a proposal tabled by US authorities which could see the bank slapped with a 14 billion US dollar (£10.5bn) bill, linked to the sale of mortgage-backed securities during the financial crisis.

It’s like 2008 all over again.

To anyone involved in the world of banking that short sentence is enough to send a shiver down the spine. The road back to something approaching stability in the global marketplace has been a long and arduous one, so news of the problems facing Deutsche Bank are worrying indeed.

As shares plummeted below €10 for the first time in history, bosses at Deutsche Bank rather grudgingly confessed there was a “perception issue”.

After the early crash, there was some evidence that it was more of a blip than a catastrophe as share prices began to climb again. Nevertheless, by that point many were already calling it a crisis.

The chief executive of the bank, perhaps rather taken with the “perception” rhetoric, penned an email to his 100,000 staff, assuring them the institution’s finances remained in rude health. It seemed to work. The share price, which had fallen by almost 10%, crept back up to a relatively healthy minus 5%.

Nevertheless, the bank is undoubtedly under pressure and there will inevitably be an impact on other banking institutions.

It is to be hoped the lessons learnt in such brutal fashion just eight years ago will ensure a rather more resilient global response this time around.