Stability of Germany’s biggest bank questioned

Deutsche Bank shares take wild ride Friday

Berlin — Shares in Deutsche Bank swung wildly on Friday, touching a record low before roaring back to life, amid speculation about the stability of Germany’s biggest bank and the European financial system.

Having initially fallen 8 percent, the shares rallied to close more than 6 percent higher on hopes the bank will be able to negotiate down the massive cost of settling a U.S. investigation.

The U.S. government had been asking for $14 billion to settle claims over the bank’s sales of mortgage securities, complex investments that were one of the causes of the global financial crisis in 2008. The U.S. government says Deutsche Bank was among several companies that misled investors about the quality of these investments.

That price was so huge — just below the bank’s total market value as of Friday — that it raised speculation that Deutsche Bank would have to raise new capital, diluting the value of its shares.

Those concerns, as well as broader worries about the bank’s ability to turn around its ailing businesses, hammered its shares in recent weeks. They closed up 6.4 percent at 11.57 euros — a strong close after earlier in the day trading below 10 euros for the first time ever.

The rally was prompted by an unsourced report by Agence France Press that the U.S. government had agreed to a settlement worth $5.4 billion. Deutsche Bank declined to comment on the report.

Investors are likely “getting cold feet given the possibility of more news over the weekend that could easily send the shares soaring come Monday,” said Chris Beauchamp, chief market analyst at IG.

With or without a deal with U.S. authorities this weekend, Deutsche Bank faces questions about its operations that will keep investors on edge.

It is heavily exposed to complex investments and has been slow to restructure its business. It is shedding some 35,000 jobs and selling unprofitable units. It is also struggling to make a profit due to low official interest rates, which reduce the amount of money it can make by lending. Last year, it booked a 6.8 billion euro, or $7.5 billion, loss.