PA ANALYSIS: Deutsche Bank brinksmanship leaves market teeth on edge

Added 26th September 2016

Shares in Deutsche Bank slumped over 6% on Monday morning as investor worries about its capital position intensified and the focus shifted from the boardroom to politics.

PA ANALYSIS: Deutsche Bank brinksmanship leaves market teeth on edge

The news over the weekend, subsequently confirmed by a spokesperson on Monday that German Chancellor, Angela Merkel had ruled out government aid for the bank ahead next year’s election pulled the stock down to 20-year lows and the rest of the global banking sector along with it.

Deutsche Bank shares have halved in 2016, largely on the back of significant speculation about the bank’s balance sheet. Investors have increasingly worried over the course of the year about both its gross derivatives exposure and how much the bank could be on the hook for in terms of fines – most recently from an investigation by the US Department of Justice into its retail mortgage backed securities business.

Earlier this month, Deutsche Bank confirmed speculation of “an opening position by the DoJ of $14bn”. In a statement the bank said it “has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning”.

While few analysts expect the eventual fine to be anywhere close to the $14bn originally proposed, there are worries that a fine of even less than half of that could put significant pressure on the bank’s capital reserves.

In a piece out on 19 September, Bloomberg quoted Societe Generale analyst, Andrew Lim as saying in a note that any settlement above 5.4 billion euros ($6 billion) would imply a capital increase is needed just to pay the fine.

Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Matthews Asia Funds Asia Dividend
Matthews Asia Funds Asia Dividend...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



Investment Strategy




PA Channel Island 2016
PA Channel Island 2016

8th November 2016
The Royal Yacht, Jersey


17th November 2016
The Andaz

PA Emerging Markets 2016
PA Emerging Markets 2016

1st December 2016
The Mayfair, London

Sponsored Content

Investment Strategy