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Deutsche Bank shares perk up on insurance sale, rescue plan denial


Deutsche Bank shares perk up on insurance sale, rescue plan denial



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The German government has denied it has been working on a rescue plan for Deutsche Bank in case it cannot raise the money needed to pay a massive fine from the US Justice Department.

“This report is wrong. The government is not preparing rescue plans, there is no reason to speculate on such plans,” the finance ministry said in a statement.

John Cryan, the chief executive of Germany’s biggest lender, has also denied ever asking for government support, or even hinting that it might be needed.

The denials were in response to a report in news weekly Die Zeit that German and EU officials were working on an emergency plan for Deutsche Bank “if the worst comes to the worst”.

The report also said the government could “in the most extreme emergency” buy a 25-percent stake in the bank.

The company’s shares, which hit a fresh record low this week, rose two percent on Wednesday after it sold its British insurance business Abbey Life to Phoenix Group Holdings.

That sale meant an 800 million euro pre-tax loss but has slightly increased Deutsche’s capital reserves.

It is selling non-core assets and reducing its balance sheet in an effort to reassure anxious investors and meet regulators’ demands.

The $14 billion (12.5 billion euros) US demand is to settle claims the bank mis-sold mortgage-backed securities before the financial crisis in 2007-2009.

Deutsche Bank’s overall legal provisions stood at 5.5 billion euros at the end of June. However it is facing three other large legal headaches – alleged manipulation of foreign exchange rates, an investigation into suspicious equities trades in Russia and allegations of money laundering.

Bank of England Deputy Governor Minouche Shafik dismissed comparisons with the collapse of Lehman Brothers at the height of the financial crisis in 2008.

“Many banks are struggling with reforming and transforming their business models,” she said in London. “I think the area that is less profitable right now is the investment banking side.”

Banks are the worst performing sector in Europe so far this year and Consultinvest fund manager Enrico Vaccari said consolidation could help ease worries for an industry struggling to make more profit because of ultra low interest rates and sluggish growth.

“Mergers are better than capital increases,” he said.


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