Deutsche Bank Stocks Drop To New Low On Fears Of U.S. Dispute
Deutsche Bank saw its shares drop to a new low on Monday after a report stated that the struggling German lender would be unlikely to receive any state-aid.
A weekly news magazine known as Focus in Germany reported on Friday that the countrys Chancellor, Angela Merkel had decisively said there will be no help offered to Deutsche Bank over its legal troubles in the U.S. The article went on to say that Merkel made her view clear when speaking with John Cryan, Deutsche Bank’s CEO.
Shares of Deutsche Bank have continued to fall especially this month after the U.S. Justice Department outlined that the bank will have to pay $14 billion in settlements over investigations of mortgage securities. The investigations are surrounding how the bank sold its securities prior to the financial crash in 2008.
In response to the report, a German government spokesperson issued a statement on Monday saying there was no reason to consider state aid for Deutsche Bank. Head of communications and senior group director at the bank said that reports of state aid were “just speculation” and that the bank plans to resolve its issues independently.
“At no point of time (CEO) John Cryan has asked the chancellor for support in the negotiations with the Department of Justice and he doesn’t intend to do that. He is very strong on that position.”
With regards to the settlement, Deutsche Bank noted that a sum between $2 billion and $3 billion would be reasonable after it paid $1.9 billion three years ago to resolve claims along the same lines.
Investors have already raised concerns over Deutsche Bank’s cashflow with worries that it was overexposed to the energy sector which could eventually lead to a lack of capital.
After the financial crisis most banks have been rebuilding their balance sheets however some European competitors have been slower. Deutsche Bank U.S. banks have been busy rebuilding their balance sheets after the 2008 crisis but their European counterparts have been slow off the mark. Deutsche Bank did say in February earlier this year that it had sufficient capital to maintain its tier 1 debts.
ABN AMRO Bank has in the past hinted that Deutsche Bank’s tier 1 coupon payments potentially could be at risk. Now the Justice Departments larger than expected fines have again renewed concerns that specific bonds could be defaulted on by the bank.