Hope Fades on Deutsche Bank Settlement

Andamento del mercato - 10/10/2016

Shares of Deutsche Bank are attempting to rebound once again in Monday trade after the troubled German lender failed to report the much-rumoured reduced settlement with the US Department of Justice.  Investors were hoping that Deutsche Bank would, over the course of the weekend, arrive at a settlement with the DOJ related to several investigations into its sale of mortgage securities. However, the failure to announce any such deal renewed liquidity concerns, sending shares sliding more than -3.00% to lows of EUR 11.63 per share at the weekly reopening before recovering. Citing unnamed sources, tabloid Bild am Sonntag wrote that Deutsche Bank CEO John Cryan met with senior officials at the DoJ late on Friday but could not arrive at an agreement. Several other media outlets confirmed the lack of a deal, although officially, the bank declined to comment.  Meanwhile, the market is rife with speculation that Deutsche Bank needs to raise cash fast to pay the $14.0 billion the Justice Department has stipulated to settle ongoing investigations.

Worries about the bank’s reportedly precarious cash scenario are not new. Investors hammered shares earlier in the year amid concerns that the bank’s exposure to the beaten down energy sector could hurt the bottom-line and earnings.  Deutsche Bank has resolutely defended itself over the past few weeks, saying there is "no reason to worry" given the "comfortable cushion." However, those assurances do not seem to have settled investors’ nerves, with the stock coming under intense pressure from aggressive short-selling. The renewed heat on Germany's biggest bank comes close on the heels of a report last month that said it was inching close to a $5.5 billion settlement. However, expectations were quashed when no official announcement was made. As a result, the suspected failure of the latest negotiations are well on track to provide a further setback for already disappointed shareholders.  Even though shares have been able to erase much of September’s losses, the tides may once again turn against the company if they fail to find a quick solution.


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