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Rollercoaster Friday for Deutsche Bank on settlement fears and hopes

Rollercoaster Friday for Deutsche Bank on settlement fears and hopes
By Euronews
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Deutsche Bank's shares bounced back on Friday after a media report it was close to settling with US authorities over alleged misselling of mortgage-backed securities.


Friday saw torrid trading for Deutsche Bank’s shares; they fell close to nine percent early on Friday and ended the day up 6.4 percent.

The sell-off came on fears Germany’s biggest bank would not be able to cover mounting legal costs.

It faces billions in fines and settlements from alleged wrongdoing dating back to the 2007/2008 financial crisis.

The bounce back started after its Chief Executive John Cryan insisted it was strong and stable.

He sent a letter to staff on Friday seeking to reassure them and addressed reports of the departure of a few hedge fund clients, blaming unfounded speculation and “certain forces” that wanted to weaken trust in the bank.

Cryan sought to put the moves into perspective, saying: “We should look at the complete picture.” He wrote that Deutsche had more than 20 million customers and reserves of more than 215 billion euros.

“We are and remain a strong Deutsche Bank,” Cryan stressed.

The shares’ rise was helped by a report from the AFP news agency that Deutsche Bank is close to reaching a settlement with US authorities over the sale of toxic mortgage bonds for much less than the $14 billion (12.5 billion euros) originally demanded.

AFP said the settlement would be $5.4 billion (4.8 billion euros).

Deutsche and the German finance ministry declined to comment on the report.

The bank has been fighting the fine. If it were imposed in full the lender would have to turn to investors and raise money by selling more shares. The German government this week denied a newspaper report that it was working on a rescue plan for the bank.

Worries over a major bank in Europe’s largest economy and talk of a government rescue have stirred painful memories of the 2007-2009 financial crisis and sent tremors through global markets.

Analyst Oliver Roth with Oddo Seydler Bank said this is not a repeat of the near collapse of eight years ago: “This is not a crisis similar to Lehman [Brothers] because the authorities, the regulators and countries have learned a bank like this cannot default because of its position in the system. Which means that Deutsche Bank is not going to go bankrupt but it has to solve its problems and if the bank cannot do it by itself it must be helped.”

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