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Market fears forces Deutsche Bank to issue assurances over financial health Market fears forces Deutsche Bank to issue assurances over financial health
(35 minutes later)
Deutsche Bank is attempting to quash fears about its financial health as its shares crumbled to new lows on Friday, driving stock markets in Asia and Europe sharply lower.Deutsche Bank is attempting to quash fears about its financial health as its shares crumbled to new lows on Friday, driving stock markets in Asia and Europe sharply lower.
Shares in Germany’s biggest bank fell below €10 (£8.5) in early trading, a slide of 10% that had been foreshadowed overnight when they slumped in the US following a report by Bloomberg that 10 hedge funds had reduced their financial exposure to Deutsche Bank.Shares in Germany’s biggest bank fell below €10 (£8.5) in early trading, a slide of 10% that had been foreshadowed overnight when they slumped in the US following a report by Bloomberg that 10 hedge funds had reduced their financial exposure to Deutsche Bank.
John Cryan, the Briton who has been running the bank for 15 months, attempted to calm nerves on Friday morning with a message to Deutsche Bank staff. “There are forces now under way in the market that want to weaken confidence in us,” he said.John Cryan, the Briton who has been running the bank for 15 months, attempted to calm nerves on Friday morning with a message to Deutsche Bank staff. “There are forces now under way in the market that want to weaken confidence in us,” he said.
“Our job now is to ensure that this distorted perception does not more strongly influence our day-to-day business,” said Cryan, in a memo reported by Reuters.“Our job now is to ensure that this distorted perception does not more strongly influence our day-to-day business,” said Cryan, in a memo reported by Reuters.
The bank’s share price recovered slightly after Cryan’s memo was reported, climbing back above €10 but still down 6% on its opening level. The bank’s share price recovered slightly after Cryan’s memo, climbing back above €10 but still down 6% on its opening level.
Deutsche’s plight had a knock-on effect in the UK, with shares in Barclays and Royal Bank of Scotland both falling 3% on Friday morning and the FTSE 100 falling 1.5% – some 100 points – while stock markets in Germany and France were also 1.5% lower. Deutsche’s plight had a knock-on effect in the UK, with shares in Barclays and Royal Bank of Scotland both falling 3% on Friday morning and the FTSE 100 falling 1.5% – 100 points – while stock markets in Germany and France were also 1.5% lower.
While Deutsche has been the focus of sector-wide concerns about banks’ ability to cope with low interests since the start of the year, anxiety about its ability to pay a $14bn penalty from the US department of justice for the sale of mortgage bonds a decade ago has driven its shares to near 30-year lows this week. The shares are now taking a fresh hit on concerns that billions of euros are being withdrawn by hedge funds. While Deutsche has been the focus of sector-wide concerns about banks’ ability to cope with low interests since the start of the year, anxiety about its ability to pay a $14bn penalty from the US Department of Justice for the sale of mortgage bonds a decade ago has driven its shares to near-30-year lows this week. The shares are now taking a fresh hit on concerns that billions of euros are being withdrawn by hedge funds.
Cryan has insisted the bank will not pay the $14bn which the DoJ has demanded. Under pressure from some analysts to accelerate his restructuring programme, Cryan is understood to be in the US, which might indicate that the bank is trying to further engage with the authorities. Cryan has insisted the bank will not pay the $14bn the DoJ has demanded. Under pressure from some analysts to accelerate his restructuring programme, Cryan is understood to be in the US, which might indicate that the bank is trying to further engage with the authorities.
His message matched that of Barry Bausano, chairman of Deutsche’s hedge fund business, who also been trying to stem any panic. Bausano told CNBC on Thursday that its prime brokerage division, which services hedge funds, was “still very profitable” but said there was “no question we have a perception issue”.His message matched that of Barry Bausano, chairman of Deutsche’s hedge fund business, who also been trying to stem any panic. Bausano told CNBC on Thursday that its prime brokerage division, which services hedge funds, was “still very profitable” but said there was “no question we have a perception issue”.
Deutsche’s possible penalty for misselling of US residential mortgage backed securities is also driving down shares in Barclays and RBS, as they too face punishment for these activities which took place in the run up to the 2008 crisis. Deutsche’s possible penalty for mis-selling of US residential mortgage backed securities is also driving down shares in Barclays and RBS, as they too face punishment for these activities which took place in the run up to the 2008 crisis.
The Financial Times reported on Friday that the DoJ was aiming to wrap any settlement with Deutsche into one with Barclays and Swiss bank Credit Suisse and have it completed before the US presidential election on 4 November. Credit Suisse’s shares were off 4.5%. RBS, which could take a hit of as much as £9bn, said earlier this week it was not in settlement talks.The Financial Times reported on Friday that the DoJ was aiming to wrap any settlement with Deutsche into one with Barclays and Swiss bank Credit Suisse and have it completed before the US presidential election on 4 November. Credit Suisse’s shares were off 4.5%. RBS, which could take a hit of as much as £9bn, said earlier this week it was not in settlement talks.
Deutsche has previously tried to quash concerns about its financial position by pointing out it has more than €200bn in cash. “Our trading clients are among the world’s most sophisticated investors. We are confident that the vast majority of them have a full understanding of our stable financial position, the current macro-economic environment, the litigation process in the US and the progress we are making with our strategy,” the bank said.Deutsche has previously tried to quash concerns about its financial position by pointing out it has more than €200bn in cash. “Our trading clients are among the world’s most sophisticated investors. We are confident that the vast majority of them have a full understanding of our stable financial position, the current macro-economic environment, the litigation process in the US and the progress we are making with our strategy,” the bank said.
Fabrizio Camelli, head of the Deutsche wealth management business, told Germany’s Süddeutsche Zeitung there had not been “any noticeable outflow of client funds”.Fabrizio Camelli, head of the Deutsche wealth management business, told Germany’s Süddeutsche Zeitung there had not been “any noticeable outflow of client funds”.