Friday, August 12, 2016

Germany's economic CRISIS: Deutsche Bank shares plunge as customers & investors lose faith

ANGELA Merkel could be facing financial chaos after Germany’s largest bank fell into the middle of its biggest crisis as share prices plummeted due to customers losing faith.Deutsche Bank’s commercial arm recorded a shocking share price drop of 31 per cent as it hurtled to its lowest in five years. CEO John Cryan openly admitted at the analysts’ half-year figures conference that customer concern had attributed to the drop as they are having doubts about the “financial strength” of Deutsche Bank - something he said was unfounded. However, investors fear some customers will hold back even more over concerns of the bank’s weak capitalisation which would intensify problems for Germany’s largest institution. In the second quarter of this year, trading bond revenue, as well as currencies and commodities, hurtled downwards by 19 per cent. US competitors in contrast recorded an increase of 22 per cent on average.Desire for customer deposits fell slightly between late 2015 an mid-2016 to £486.3billion. Current account deposits have increased by 1.3 per cent to £300bn, but overall the bank is lagging behind the market. Germany’s other banks paint a different picture, with Deutsche Bundesbank’s current account deposits climbing by 2.8 per cent in the year from May 2016. Deutsche Bank recorded a decline in fixed term deposits of 1.5 per cent, while Bundesbank had an increase of 0.8 per cent.Panic started two weeks ago when Deutsche Bank revealed its second quarter net income had dived by 98 per cent to around £16m from £668m in the same period last year. Investors rushed to dump stocks after the bank shocked the markets with its dismal trading update.Revenue in the quarter fell a sharp 20 per cent to £6.2 bn (€7.4bn). The dire results sent Deutsche's share price tumbling by 4.6 per cent.Mr Cryan warned the poor outlook could lead to even more job cuts and cost cutting than was already underway. The CEO, said: "If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring." Financial expert Max Keiser recently claimed Deutsche Bank is "technically insolvent" and runs a "ponzi scheme". He said: "The bank needs to go out of business, because they are not solvent. "But politicians, including Schaeuble, allow for financial engineering products to come onto the market that mask insolvency. "It's dead, it's insolvent, the bank is dead... This is a dead bank walking."The firm is one of Germany's largest lenders and had already lost around 40 per cent of its value this year amid investor concerns, which include the current low rate interest and a struggling European economy. Predictions Britain’s vote to leave the European Union will hamper growth are reflected in the bank’s situation, with Brexit expected to keep rates lower for even longer.President of the European Central Bank Mario Draghi has previously admitted concern over pushing rates too low because of the affect it would have on bank balance sheets. However, the central bank is expected to take extra action - which could include furher rate cuts - in the coming months in an effort to boost growth amid the hit from Brexit.
 express

No comments: