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News by Fred Alan Medforth
Monday, September 26, 2016
Germany's BIGGEST Bank ON BRINK: Deutsche Bank hits RECORD LOW as Merkel rules out bailout
DEUTSCHE Bank shares have reached their lowest level in more than two decades, as fears flare over the troubled firm's future. Stock in the bank dived by more than six per cent during Monday morning trading, after the German Chancellor Angela Merkel reportedly said the government would NOT step in to provide state rescue of the country's financial firms should they need it.
Panicked investors rushed to dump shares in Deutsche off the back of the news, sending prices to their lowest level since 1992.
The German lender is looking increasingly fragile amid this latest setback.Little more than a week ago, investors fervently sold-off the bank, after it emerged that US authorities want Deutsche to pay a huge $14billion (£10.5bn) in fines over a scandal related to the financial crisis.
Deutsche's value has now plunged by more than half this year, as concerns over low interest rates and the struggling eurozone economy also plauge the bank.
Chris Beauchamp, chief market analyst at trading platform IG, said: "The parlous state of Deutsche Bank exploded onto everyone’s radar once again.
"The bank has been limping along for months now, but reports that Angela Merkel may not step in to rescue the bank have sent the shares tumbling, dragging banks across the UK and Europe lower as a result.
"The gut feeling of most investors is that Berlin would be forced to act to avoid the loss of a key institution, but gut feelings do not always make the best trades."In July markets were shocked after the group revealed its second quarter net income had dived by 98 per cent to around £16million (€20m) from £668m (€796m) in the same period last year.
Earlier this year, chief executive John Cryan was forced to speak out over Deutsche's stability in an effort to ease investor concerns, insisting insisted the company's balance sheet was "absolutely rock solid".
He said: "The market also expressed some concern about the adequacy of our legal provisions but I don't share that concern.
"We will almost certainly have to add to our legal provisions this year but this is already accounted for in our financial plan."
But his comments appear to have had little ongoing effect.
Michael Hewson, chief market analyst at CMC Markets UK, said: "Germany’s largest bank is currently embroiled with the US Department of Justice over the mis-selling of MBS with the latter insisting that the bank pay a $14bn fine.
"While the eventual fine may not be anywhere near that much the litany of legal problems has raised concerns about the health of one of Europe’s largest lenders and any contagion effect to the rest of Europe’s sickly banking sector.
"While one can understand the reticence of German politicians to bailout yet another bank, particularly in the lead up to an election next year, one has to question the wisdom of articulating that reluctance out loud when markets are already nervous about Deutsche Bank’s capital position.
"It’s akin to a red rag to a bull or a bear given that due to its size Deutsche Bank is arguably too big to fail and markets could well look to test the German government’s resolve on that as we head into next year." http://www.express.co.uk/finance/city/714399/Deutsche-Bank-shares-hit-lowest-level-in-24-years-amid-concerns-of-state-bailout