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Are tanking shares at Deutsche Bank the start of the next financial crisis? | |
(35 minutes later) | |
Shares in Germany's biggest bank have plummeted to 30-year lows this week as losses on stock markets and fears over the global economy prompted investors to flea with their cash. | Shares in Germany's biggest bank have plummeted to 30-year lows this week as losses on stock markets and fears over the global economy prompted investors to flea with their cash. |
Deutsche Bank CEO John Cryan was forced to issue a statement to reassure investors that the bank is "absolutely rock solid" on Tuesday and would continue to make scheduled payments. | Deutsche Bank CEO John Cryan was forced to issue a statement to reassure investors that the bank is "absolutely rock solid" on Tuesday and would continue to make scheduled payments. |
That kind of disclosure is highly unusual in the world of banking, which remains a secretive business. | That kind of disclosure is highly unusual in the world of banking, which remains a secretive business. |
It may have stoked suspicions that something is up. | It may have stoked suspicions that something is up. |
Nonetheless share prices bounced back on Wednesday. | Nonetheless share prices bounced back on Wednesday. |
This was likely following reports that Deutsche Bank is considering buying back some of its debt to stop any further losses. | This was likely following reports that Deutsche Bank is considering buying back some of its debt to stop any further losses. |
Unfortunately everything is still quite a long way from fine. | Unfortunately everything is still quite a long way from fine. |
Shares in Deutsche Bank are down 35 per cent this year, leading the way among heavy losses at many European banks. | Shares in Deutsche Bank are down 35 per cent this year, leading the way among heavy losses at many European banks. |
There were few warnings that Lehman Brothers was in trouble before Fitch, a ratings agency, gave a negative outlook on the bank in June 2008, three months before it filed for bankruptcy. | There were few warnings that Lehman Brothers was in trouble before Fitch, a ratings agency, gave a negative outlook on the bank in June 2008, three months before it filed for bankruptcy. |
Seven years later, another ratings agency called S&P cut Deutsche Bank's rating in the same way, indictating increased probability that the bank could go bust. | Seven years later, another ratings agency called S&P cut Deutsche Bank's rating in the same way, indictating increased probability that the bank could go bust. |
But we won't know whether Deutsche Bank is in crisis until the crisis actually hits because bankers are typically so tight-lipped. That's why people found that message from John Cryan so alarming. | But we won't know whether Deutsche Bank is in crisis until the crisis actually hits because bankers are typically so tight-lipped. That's why people found that message from John Cryan so alarming. |
Deutsche Bank has expanded rapidly over the last two decades, buying up smaller banks in a bid to challenge some of the biggest US investment groups. | Deutsche Bank has expanded rapidly over the last two decades, buying up smaller banks in a bid to challenge some of the biggest US investment groups. |
Then last year, its co-bosses were ousted in June and massive restructuring was announced in October to try and rein in spending. | Then last year, its co-bosses were ousted in June and massive restructuring was announced in October to try and rein in spending. |
But investors aren't convinced that this will be enough. As shares fell yesterday, investors fled to credit default swaps, which pay out when a bank goes bust. | But investors aren't convinced that this will be enough. As shares fell yesterday, investors fled to credit default swaps, which pay out when a bank goes bust. |
“Investors have completely lost their faith in the bank,” a top 10 shareholder told Reuters. |