Deutsche Bank has failed to secure a speedy deal with the US Department of Justice over the misselling of mortgage-backed securities.
ADVERTISEMENTDeutsche Bank’s shares continue their rollercoaster ride.
They were down again on Monday with investors unhappy that it does not yet have an agreement with the US Justice Department over wrongdoing dating back to 2007. Early on in the trading session the shares fell close to four percent, but they ended the day up nearly three percent.
During the day Reuters reported the bank was rethinking its reorganisation plan.
The slump was because Chief Executive John Cryan had been in Washington for the International Monetary Fund and World Bank’s autumn meetings and reportedly while there he met with Justice Department officials but was not able to negotiate down the $14 billion (12.54 billion euro) fine the US has demanded.
Deutsche Bank shares fall after U.S. talks, creating knock-on effect for other lenders https://t.co/yvDuY39tXspic.twitter.com/go15FXkEVk
— Bloomberg (@business) October 10, 2016
In addition, the Financial Times has reported the European Central Bank gave Germany’s biggest lender special treatment in recent stress tests to see how European financial institutions would cope with a crisis.
The FT said money from the sale of some Deutsche Bank assets was included in its capital reserves even though that deal had not been done by the end of 2015, the official cut-off point for transactions to be included.
The sale of its stake in Chinese lender Hua Xia has still to be completed.
FT learns that Deutsche Bank was given special treatment in this summer's EU stress tests https://t.co/Yvqdb7gP9Qpic.twitter.com/Wzbf6JLae9
— Financial Times (@FT) October 10, 2016
Deutsche Bank is expected to issue new shares, sell assets, or both, once it knows the scale of the fine, to ensure that its capital ratio remains within regulatory limits.
It is struggling to restore market confidence. Its shares slumped when the $14 billion settlement figure was leaked but were already low as investors questioned whether Cryan had a credible plan to revamp the bank.
Terry Torrison, managing director at Monaco-based McLaren Securities, was not one of those who was looking for a speedy resolution to the settlement over the misselling of mortgage-backed securities.
Torrison said: “They were never going to sort out the US issues that quickly, and whatever happens, I still think they will need to have a rights issue.”
The head of the Eurogroup Jeroen Dijsselbloem said on Monday: “I think it’s in everyone’s interest to clear this factor of instability up as quickly as possible.”
