Deutsche Bank gets key investor backing

CEO says bank’s financial strength ‘beyond doubt’ as criminal charges loom

Deutsche Bank and its biggest investor sought to reassure shareholders and staff of its financial strength after a ratings downgrade cast doubts on its turnaround plans.

Shares in Deutsche Bank closed at an all-time low on Thursday as the fallout from past misadventures in investment banking haunted chief executive Christian Sewing’s attempt to return the lender to its corporate banking roots.

A source familiar with the thinking of the European Central Bank, which regulates Deutsche Bank, and its top shareholder HNA Group Co Ltd of China, said yesterday they supported management in efforts to restore long-term profitability.

This followed a report in the Wall Street Journal on Thursday that the US regulator viewed the lender as “troubled” last year, and yesterday a Standard & Poor’s downgrade of Deutsche Bank’s credit rating to BBB+ from A-.

Meanwhile in Australia, federal prosecutors were preparing criminal cartel charges against Deutsche, as well as the country’s third-largest bank and Citigroup, over a $2.3 billion (Dh8.4 billion) share issue. All deny wrongdoing.

Sewing, a Deutsche Bank ‘lifer’ appointed in April after the removal of former CEO John Cryan, said in a letter to staff: “At group level, our financial strength is beyond doubt.”

But he admitted that the newsflow was “not good”. Sewing also addressed US regulatory concerns following the report that said the Federal Reserve had designated Deutsche Bank’s operations as in a “troubled condition”.

The WSJ report sent Deutsche Bank’s shares down 7 per cent on Thursday to their lowest-ever closing level, valuing it at $22 billion. They recovered by 4 per cent yesterday.

Five-year credit default swaps, a measure of the bank’s risk of defaulting on its obligations, fell by 16 basis points to 172 basis points as its shares rebounded, IHS Markit data showed.

Sewing said Deutsche Bank’s credit and market risk levels had rarely been so low, speculation it was exposed to political uncertainty in Italy was unfounded and funding plans for this year were well advanced.