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WORLD ECONOMY ON THE BRINK: Deutsche Bank slump triggers global bank crisis as shares DIVE

TROUBLED Deutsche Bank’s shares have plunged to new lows, sparking fresh fears for the future of Germany’s largest bank, as panic ripped across Europe’s financial sector.

Deutsche BankAFP•GETTY

10 hedge funds are said to have pulled business from Deutsche Bank


Deutsche’s German-listed stock tumbled by more than six per cent on Friday morning to a new record low, after its US-listed shares fell by more than eight percent overnight amid news hedge funds were pulling business away from the lender.The fresh sell-off rounds off a week of woe for the Germany’s flagship bank, and sent shockwaves blasting across eurozone banks.

Shares in Germany’s second-biggest lender Commerzbank dived by more than six per cent, while France’s Societe Generale and Spain’s Banco Santander tumbed by around four and five per cent respectively.

The fear sent Germany’s top stock index the DAX down by more than 1.5 per cent, France’s CAC by 1.6 per cent and Spain’s IBEX by a massive 2.3 per cent.

Britain’s FTSE 100 and FTSE 250 were both down by around one per cent in morning trading.

Shares slumped after reports that around 10 hedge funds had pulled business from Deutsche Bank

Deutsche’s chief executive again tried to restore faith in the bank with a memo to employees today.John Cryan told staff news that a few hedge funds had reduced activities at Deutsche were “causing unjustified concerns”.
Around 10 hedge funds have reportedly adjusted positions and withdrawn some excess cash from the bank because of concerns for the group.

Investors fear the bank could struggle to pay a fine of up to £10billion from the US Department of Justice over a mortgage scandal, as well as other looming liabilities.

At the same time, European banks are finding it harder to turn a profit amid negative interest rates and a struggling eurozone economy.

Deutsche has lost more than half its value this year, as investors dump stocks in the firm.

Mr Cryan said: “I understand if you feel concerned by the extensive coverage on this issue.

“Our bank has become subject to speculation.

“Ongoing rumours are causing significant swings in our stock price.”

Deutsche share priceYahoo

Deutsche has lost more than half its value this year

Deutsche’s headache grew this week after reports that Paresh Davdra, chief executive of RationalFX, said: “Investors already lacking confidence in the beleaguered bank are increasingly concerned about the health of Europe’s financial sector as Chancellor Merkel’s continued reluctance to intervene suggests no immediate solution to the crisis.”The next few days will not only be crucial for Deutsche bank, but also currencies across Europe.”The heavy sell-offs were halted by news that the German government did have a contingency plan for Deutsche in an emergency. But now reports that a small subset of the Deutsche’s hedge fund business have moved to other firms, according to an internal bank document seen by Bloomberg, saw sell-offs resume.
Izzy Englander’s £26billion Millennium Partners, Chris Rokos’s £3billion Rokos Capital Management, and the £10billion Capula Investment Management are said to be among the funds pulling business from Deutsche.

Deutsche chief executive John Cryan has insisted the bank has not asked for state aidBLOOMBERG

Deutsche chief executive John Cryan has insisted the bank has not asked for state aid


Deutsche Bank's shares hit a record low earlier this weekAFP

Deutsche Bank’s shares hit a record low earlier this week


Seeking to reassure investors, Deutsche said its trading clients remained largely supportive.In a statement the bank said: “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 U.S. and the progress we are making with our strategy.”

Earlier this week, Deutsche chief executive John Cryan desparately insisted the bank had not asked for state aid.

Like many of its peers, Deutsche has faced a series of lawsuits that often trace back to the boom years before the crash.

Its litigation bill since 2012 has already hit more than £10billion.

In July the bank only scraped through European stress tests – designed to gauge its ability to withstand a crisis – and has warned it may need deeper cost cuts to turn itself around.

Germany’s biggest bank has also found profits squeezed by the European Central Bank’s money printing policy.They have been seeking to boost revenue by passing on costs to corporate customers and increasing fees for retail depositors, but profit margins remain thin.

The problems of Deutsche, once Germany’s flagship on Wall Street, are awkward for Berlin which has berated many eurozone peers for economic mismanagement and ruled out state intervention by the likes of Italy into its banking problems.

Angela MerkelGETTY

Angela Merkel has refused to bail out Deutsche Bank


Deutsche is disputing a fine of up to £10billion from the US Department of JusticeGETTY

Deutsche is disputing a fine of up to £10billion from the US Department of Justice


It comes as Germany prepares for national elections next year.Angela Merkel’s future popularity has sunk because of her open-door policy for migrants.

Were Deutsche Bank to require state help, her standing as the leader who successfully steered Germany through the financial crisis could also be called into question.

Deutsche got through the global crisis without state aid, but Commerzbank, Germany’s second biggest lender, needed a £15billion bailout in 2008 and the state still holds a 15 percent stake.

http://www.express.co.uk/finance/city/716092/hedge-funds-pull-business-Deutsche-Bank-fears-bank-collapse-shares-plummet

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