Deutsche Bank’s shares rebounded on Wednesday following reports that it is considering buying back several billion euros of its debt.
We think the stock will struggle to re-rate, despite being the cheapest globally systemic bank
Germany’s flagship lender rose at one stage by 17 percent and was up 10.28 percent at the close.
Other European banks were boosted by the news, even though concerns remain about their health.
Deutsche Bank’s share price has fallen 40 percent since the start of the year to its lowest in 30 years.
Investors are selling on worries about it restructuring and returning to profit in the face of a global economic slowdown and negative central bank interest rates.
The two-year turnaround plan includes cutting costs by trimming its investment bank and selling non-core assets. But the bank’s efforts have been held back by having to pay out billions of dollars in fines to end a string of legal disputes and by ageing technical infrastructure.
Brenda Kelly, market analyst at London Capital Group said: “You’ve got to look at Deutsche Bank’s results from last year. They reported a 6.8 billion loss. Of course this was down to, in some respects, restructuring costs but also litigation costs too and there will more than likely be more litigation costs this coming year. They are selling a lot of assets, they are moving away from the retail sector and of course with the global slow-down that we’re seeing, there are fears that the investment arm will not keep up the pace when it lets go of its retail arm.”
Trying to reassure investors German finance minister Wolfgang Schäuble this week said he had “no concerns” about the lender and its chief executive John Cryan called it “absolutely rock-solid” in a message to employees.
That brought some sceptical responses on Twitter.
The bank still faces a formidable task with reassurances about its capital levels doing little to improve underlying investor confidence and few other options on the table to trigger a recovery.
“We think the stock will struggle to re-rate, despite being the cheapest globally systemic bank,” Morgan Stanley analyst Huw Van Steenis wrote after the bank posted its record loss.