Deutsche Bank rout deepens

Deutsche Bank shares were indicated down 6.2 percent ahead of the opening of the Frankfurt market on Friday, after Germany’s largest lender admitted it had an image problem with investors as fresh concerns over its stability emerged.

The lurch followed a Bloomberg report on Thursday that a number of hedge funds that clear derivatives trades with Deutsche had withdrawn some excess cash and adjusted positions, a sign that counterparties are wary of doing business with it.

One large hedge fund in Asia had pulled out its collateral from Deutsche amounting to $ 50 million in the last two days, while another fund which had a “smallish amount” with the bank was monitoring the situation closely and had not pulled out yet, people familiar with the matter told Reuters on Friday.

Another person with knowledge of the development said it was common to see fluctuations in balances among hedge fund clients, and these actions represented a small portion of the bank’s more than 800 clients in the hedge fund business.

In a statement on Friday, Deutsche reiterated its trading clients remained largely supportive.

“We are confident the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the US and the progress we are making with our strategy,” it said.

A separate Asian hedge fund source said “sophisticated investors” would have already pulled out excess cash or unwound positions held at Deutsche, and, therefore, there would not be a huge wave of these withdrawals.

“We haven’t heard any talk that someone stopped trading with that bank in the interbank market. It’s just some hedge funds (that have stopped trading with Deutsche),” a trader at a Japanese bank said. –

AFP German Stock Market index is shown at the stock exchange in Frankfurt, Germany. Shares in Deutsche Bank, Germany’s biggest bank, hit a record low after reports that Berlin had refused state aid for the embattled lender.