Doubts cloud Deutsche Bank
Shares off 7.5%; Germany stays out as U.S. squeezes
FRANKFURT, Germany — Shares in Deutsche Bank fell sharply Monday after a report that the German government won’t intervene with U.S. officials who are pressing the bank to pay $14 billion to settle an investigation into its sales of mortgage-backed securities.
The bank’s shares closed down 7.5 percent at $11.88 on Monday after the Friday report from Focus magazine. Focus, which cited “government circles” as its source, also said the government had made it clear the bank would not receive any state bailout.
Deutsche Bank said it hasn’t asked for help with the U.S. and isn’t seeking a bailout. “The question is not on our agenda,” the bank said in a statement. “Deutsche Bank is determined to meet its challenges on its own.”
The bank has said it expects to pay less than $14 billion after negotiations.
Deutsche Bank shares have fallen 52 percent this year as the bank goes through restructuring and cost-cutting under Chief Executive Officer John Cryan. Low interest rates have squeezed bank earnings and share prices across Europe. That’s because they reduce the difference between the rates banks pay for money and what they can charge in interest for loans to consumers and businesses.
The possibility of a heavy payout to settle the mortgage issue with the U.S. Justice Department has led to speculation that the bank might need to raise additional capital, a step which can dilute current investors’ shareholding.
Deutsche Bank said a capital increase “is currently not on the agenda” and that “we do comply with all regulatory requirements.”
Government spokesman Steffen Seibert said that “there are ongoing talks between Deutsche Bank and the American justice authorities, about which only the negotiating partners can provide information” and said the government declined to take part in “speculation.”
He noted that other banks have settled similar cases with U.S. authorities and that “the government assumes that at the end of this process a fair result will be achieved on the basis of equal treatment.”
“There are no grounds for such speculation,” over state
funding for Deutsche Bank, Seibert told reporters in Berlin on Monday when asked about the report. “The government won’t participate in any such speculation.”
German Chancellor Angela Merkel had ruled out any state financing for the Frankfurt-based lender heading into the national election in September 2017, Focus reported Saturday, citing an unidentified government official.
While Merkel meets regularly with finance executives in Germany, Seibert said he couldn’t confirm a one-onone meeting with Cryan. Focus reported that Cryan had suggested in a meeting this summer that diplomatic overtures by the German government would be helpful.
“The German governmental is broadly aware that the U.S. Justice Department
in the past has made agreements with other financial institutions about compensation payments,” Seibert said. Germany “expects that at the end of these negotiations, for reasons of fair treatment, that a fair outcome will be achieved,” he said.
“I don’t buy at all what’s coming out of Germany in terms of Germany not wanting to step in ultimately if Deutsche Bank was really in trouble — it’s too important for the German economy,” Allianz Global Investors Global Chief Investment Officer Andreas Utermann said on Bloomberg TV’s Surveillance with Francine Lacqua and Tom Keene. “These are rumors that are not based on facts.”