Deutsche Bank shares plummet to record low as Merkel rules out bailout
Shares in Germany’s largest bank have hit rock bottom on Monday as Chancellor Angela Merkel reportedly refused to provide Deutsche Bank state aid in its legal battle with the United States Department of Justice (DoJ).
Deutsche shares fell as much as six percent to €10.67 in early Monday trading, the worst performance since 1992.
The bank has lost over 52 percent of its value since January and over 56 percent in the last twelve months. Earnings per share fell as much as €6.
The collapse has been prompted by a report in the German magazine Focus that said Chancellor Angela Merkel has ruled out any state assistance for the bank next year.
Merkel also declined to provide help to Deutsche Bank in its legal battle with the DoJ. The Frankfurt-based lender may be fined up to $14 billion over its mortgage-backed securities business before the 2008 global crisis, the magazine reported. The article said Merkel made her views clear in talks with Deutsche CEO John Cryan.
Deutsche Bank has denied that Cryan asked for state support from Berlin, CNBC reported on Monday.
The Bundestag expects a “fair outcome” to the US probe, the Finance Ministry said on September 16. The bank has refused to pay the US government and is seeking a reduced penalty. Deutsche has said a settlement between $2 billion and $3 billion would be more reasonable, as it had already paid $1.9 billion in 2013 to settle similar accusations, the Wall Street Journal reported in September.
If the settlement ranges from $3 billion to $3.5 billion, it would leave room to settle other legal issues, while any additional $1 billion fine would erode 24 basis points in the bank’s capital, JPMorgan Chase said.
“Clearly headlines around the DoJ settlement and those $14 billion continue to weigh on the stock,” Daniel Regli, an analyst at Main First, said in an interview with Bloomberg.
“Nobody believes that they will end up paying that amount, but for some investors it might be a concern that even the German government is discussing Deutsche Bank’s situation,” the analyst added.
Continue from Zero Hedge…
Deutsche Bank Stock Crashes Near Single-Digits As CDS Spike To Record Highs
The “most systemically dangerous bank in the world” is in grave trouble. Despite exclamations that there is “no need for additional capital” and that “Deutsche Bank is no Lehman” investors are fleeing the bank’s assets en masse as professionals pile in to buy counterparty risk protection. With the only thing standing between bank runs and stability being the confidence of depositors, and knowing full well that everybody lies when it gets serious, one witty trader noted, “if it walks like Lehman, and talks like Lehman… it is Lehman.”
Deutsche stock is collapsing…
And counterparty risk hedges are spiking…
as the bottom end of DB’s capital structure is starting to reflect a serious haircut…
And the DB pain is spreading to the entire EU banking system…
When is Draghi going to starting sell CDS Protection?
Source: Zero Hedge
Continues from Phoenix Capital…
The financial world is abuzz with talk of the first Presidential debate.
Meanwhile, one of the largest derivatives books in the world is imploding.
Deutsche Bank (DB) is the 11th largest bank in the world. And it has over $61 TRILLION (with a “T”) in derivatives on its books.
AND IT HAS LOST NEARLY A QUARTER OF ITS VALUE IN THE LAST THREE WEEKS.
DB is not alone here. Across the board, we’re getting signs of an impending banking crisis in Eurpoe.
Credit Suisse (CS) is trading BELOW its 2012 banking crisis lows.
So is Barclays (BCS)
The EU banking system is $46 TRILLION in size. This is THREE TIMES larger than the US banking system, which nearly imploded the markets in 2008.
And the EU bankinf system as a whole is leveraged at 26 to 1. Lehman Brothers was leveraged only slightly higher than this at 30 to 1.
Indeed, we believe the global markets are on the verge of another Crisis, triggered by a crisis of faith in Central Banks.
2008 was Round 1 triggered by Wall Street banks. This next round, Round 2, will be even worse as faith in Central Banks collapses.
If you’ve yet to take action to prepare for this, we offer a FREE investment report called the Financial Crisis “Round Two” Survival Guide that outlines simple, easy to follow strategies you can use to not only protect your portfolio from it, but actually produce profits.