Deutsche Bank shares recover ground after CEO John Cryan tells staff that the bank has ‘strong fundamentals’ and reports suggest US deal is close
Markets rebound as Deutsche shares jump
Deutsche Bank could pay just $5.4bn - report
DB CEO tells staff not to panic
UK economy shakes off Brexit fears
Deutsche Bank shares fall below €10, then rebound
Introduction: Why Deutsche Bank is under more pressure
9.13pm BST
The closing bell has rung in New York, signalling the end of the trading day, the week, the month and indeed the quarter.
“We are very much being driven by headline risks at Deutsche Bank.”
9.04pm BST
An important point:
Deutsche Bank’s "CoCo" bonds are still only pricing in the risk that the bank cuts off coupons, not wipes them out. https://t.co/YQCPcyRItQ pic.twitter.com/PEHhOHUgdI
8.57pm BST
Here’s a handy list of tonight’s market-moving US news, for anyone away from their terminal (or bereft of one):
US WRAP: Rumours of Deutsche Bank fine cut stokes risk sentiment pic.twitter.com/pbKzks4Zkr
8.04pm BST
Here’s Jill Treanor’s story about the latest developments in the Deutsche Bank saga:
Related: Shares in Deutsche Bank sharply up amid speculation of DoJ deal
8.03pm BST
Traders are also getting impatient for news about a possible settlement between Deutsche and the US authorities...
1 hour left till market closes and still no confirmation from #DeutscheBank or from the #DOJ . Give me a break!
8.01pm BST
Nothing momentous to report yet.... but with one hour’s trading to go, Deutsche Bank’s US shares are still up a mighty 15% tonight.
That means investors are still clinging to hopes that the bank will secure a DoJ fine that doesn’t wipe out its capital base.
6.26pm BST
Elsewhere, in a week when Opec looked like it was on track to curb output to support oil prices, US drillers continued to bring more rigs on stream.
The weekly Baker Hughes report showed:
US Baker Hughes Rig Count: 522 (prev 511)
- Oil Rigs: +7 to 425 (prev 418)
- Gas Rigs: +4 to 96 (prev 92)
5.25pm BST
Buying Deutsche Bank shares at 9.30am would have been a lucrative day's work: pic.twitter.com/w0hX84OaYB
5.09pm BST
Investors in Deutsche Bank must be feeling giddy after the wild gyrations in the bank’s share price in the course of just one day.
An early 10% slump followed reports that a number of hedge funds had cut their exposure to the bank. But reassurance from Deutsche chief executive John Cryan that the bank had strong fundamentals helped limit some of the damage, and the shares really surged near the end of the trading day on talk its US fine - the cause of much of the recent gloom around the bank - might be reduced from $14bn to around $5.4bn.
4.28pm BST
And now this:
ECB’s Stournaras: Greek, International Banking System Is Safe
- Have Tools To Protect Itself From ‘Any Developments’ Regarding DBK - RTRS
4.21pm BST
Another report is doing the rounds suggesting that Deutsche Bank may only pay $5.4bn in a settlement with the US Department of Justice, rather than the $14bn initially suggested.
AFP has reported the bank is close to a settlement, and even though the $5.4bn figure is the same as in a JP Morgan note for non-US loans, the bank’s shares have moved sharply higher.
4.11pm BST
Chris Beauchamp, chief market analyst at IG, said:
With the end of the quarter now upon us it is not surprising to see some last minute rallies in risk assets, as institutional investors look to spruce up their portfolios, but overall the bears have been denied the selloff for which they have been looking all week. Dip buying, it seems, is alive and well as an art form. Banks continue to dominate the lower reaches of the FTSE 100, as the prospect of further travails for Deutsche loom large over the sector
Ironically, Deutsche shares themselves have staged an impressive recovery, with more than a few shorts probably getting cold feet given the possibility of more news over the weekend that could easily send the shares soaring anew.
3.39pm BST
Goldman Sachs estimates that Deutsche Bank will end up paying between $2.8bn and $8.1bn, rather than the $14bn figure from the Department of Justice. But its that there is some urgency to resolve the issue.
The volatility in Deutsche Bank’s shares over the last day or so proves the point. Goldman said:
We believe Deutsche Bank’s liquidity position...is stable – and further strengthened by ECB funding backstops, which remain available to all Eurozone banks. This said, the reaction of (admittedly less liquid) the ADR to a single piece of news flow demonstrates the extent of concern in the market. As we highlighted previously, as market concerns intensify, achieving resolution to litigation, and thus capital concerns, is important.
3.21pm BST
Analysts are taking a positive view of the Eurogroup president’s earlier comments that Deutsche Bank would have to stand on its own. Connor Campbell at Spreadex said:
Despite, or perhaps because of, Jeroen Dijsselbloem coming out to state that Deutsche Bank won’t receive state aid the German giant has managed to claw its way back into the green this afternoon.
One could argue that the comments from Dijsselbloem prove that the financial health of Deutsche Bank isn’t as bad as suspected. For if it the financial firm was on its last legs there is no way the Eurozone chiefs wouldn’t find a way of preventing the collapse of the region’s biggest lender.
3.15pm BST
Deutsche Bank’s US shares are sharply higher after Thursday’s sell-off, up around 6% at the moment.
3.07pm BST
Back with Deutsche Bank and here’s the chart of its shares over the last couple of days:
@Yogi_Chan @iotafmarkets nope - they estimated $5.4bn for non-RMBS litigation pic.twitter.com/PnK3LUWPZ3
3.03pm BST
And US consumer confidence is on the rise as well.
The University of Michigan’s consumer sentiment index is up from 89.8 in August to 91.2 in September, above forecasts of a figure of 90. It is also better than the preliminary reading for September of 89.8.
2.50pm BST
Back with the US economy, and a better than expected Chicago purchasing managers index for September.
The index came in at 54.2 compared to forecasts of 52 and last month’s figure of 51.5.
USA Chicago PMI announcement - Actual: 54.2, Expected: 52.0 pic.twitter.com/W5MQUd057M
2.39pm BST
Deutsche Bank’s shares have now moved into positive territory for the day:
DBK down over 8% earlier... Positive on the session pic.twitter.com/S5yKIq8hNr
2.38pm BST
After Thursday’s falls, the US market is heading higher in early trading, with financial stocks recovering some ground on hopes that Deutsche Bank can emerge intact from the current crisis. Investors appear to be taking heart from the bank’s chief executive John Cryan telling staff the bank has strong fundamentals.
The Dow Jones Industrial Average is currently up 121 points or 0.67%, while the S&P 500 and Nasdaq Composite have both opened around 0.4% higher.
2.34pm BST
As we said earlier, Deutsche Bank’s position will look a lot healthier if it can agree a deal with the US Department of Justice to reduce its fine from the mooted $14bn. There is market chatter that a deal can be done, perhaps over the weekend, and at a much lower cost to the bank.
Whatever the case, Deutsche Bank’s shares continue to recover and are now down just 0.69% at €10.80.
Unconfirmed reports of the DOJ fine for Deutsche bank is 5.4bln.... much lower than the original feared 14bln... again still unconfirmed#DBK
Deutsche Bank may only be fined $5.4bn by DOJ - Livesquawk https://t.co/akejMwy2Av
2.03pm BST
Jeroen Dijsselbloem, the president of the Eurogroup, has told reporters that Deutsche Bank must survive on its own, without state aid, Reuters is reporting.
1.52pm BST
The early morning market panic in Europe has abated.
So, with the East Coast of America heading to work (or already there), let’s quickly catch up.
deutsche shares up nearly 7 pct from this am lows
“Equities are nursing losses into the weekend, derived from more intense anxiety about the health of Germany’s Deutsche Bank.
Major equity indices are, nonetheless, off their worst levels courtesy of intervention by DBK’s CEO saying market anxiety is excessive, fine or no fine from the US DoJ.
US Opening Calls:#DOW 18171 +0.15%#SPX 2154 +0.17%#NASDAQ 4846 +0.17%#IGOpeningCall
probably not a coincidence that $DBK turned up sharply around the time New York came into the office. Bit of a reverse ferret from yday
UK economic data reveals resilience after Brexit vote https://t.co/kvL03fpsEw
1.38pm BST
Newsflash from America: US citizens saw their incomes rise by 0.2% in August, bang in line with forecasts.
BREAKING: Personal income rose 0.2 percent in Aug vs 0.2 percent increase expected https://t.co/iSN1kpdz89
1.35pm BST
Hmmmm Deutsche Bank’s share price is picking up. Now down just 3.8% today at €10.40.
Deutsche at €10.40? I'll be. The higher it goes, the more likely "someone knows something" vs "Friday quarter end profit taking"
1.15pm BST
Investors are keeping an eye on a particular type of debt, called CoCo bonds, issued by Deutsche Bank.
Also known as AT1 bonds, they are effectively insurance for Deutsche, in the event that it needs fresh capital. Investors buy them because they offer a high interest rate, but they also know that the bonds could be converted into shares if the bank hits trouble.
Le CoCo Bond de Deutsche Bank au plus bas de son histoire >> https://t.co/QsWV51DXsw pic.twitter.com/ASsTJC3siS
The price of Deutsche’s 6% coco has dropped below 70 cents on the euro for the first time today. Last summer it was trading above 100 cents. Coco bonds are deemed among the riskiest forms of debt. They are a form hybrid debt that converts to equity when the bank’s capital falls to a certain level.
Recent concerns over the impact of a potential fine of as much as $14bn from the US Department of Justice on Deutsche’s balance sheet have sparked fears that its coco bonds could be triggered, resulting in scrapped coupon payments or forcing parts of its debt structure to be converted to equity.
Deutsche Bank: New lows for cocos, CDS in stress https://t.co/zmagxPdMTT
12.58pm BST
Neither the German or US governments will want to see Deutsche Bank suffer a meltdown this autumn, for political reasons.
Angela Merkel is already under extra pressure since the right-wing AfD party made gains in Berlin elections earlier this month. A bailout of Germany’s flagship bank would intensify criticism of her leadership, ahead of Federal Elections in autumn 2017.
12.44pm BST
Barack Obama and Angela Merkel spoke by phone yesterday, but didn’t discuss Deutsche Bank’s looming fine from the DoJ.
That’s according to a German spokeswoman, who told reporters that:
“The conversation with Obama concerned Ukraine and Syria,and was not about other issues.”
12.31pm BST
John Cryan’s claim that forces in the markets are trying to weaken confidence in Deutsche Bank has reminded some observers of another bank chief, Dick Fuld of Lehman Brothers.
Fuld notoriously told staff in 2007 that he wanted to squeeze, hard, the speculators who had shorted Lehman’s shares.
What I really want do to is reach in, rip out their heart, and eat it before they die.
Reminder: Lehman Brothers CEO speech about speculators https://t.co/5gZN2V97iQ #DB
12.21pm BST
Deutsche Bank’s shares have taken such a hammering recently that it’s hard to say exactly when they were lower.
My Reuters terminal only has data going back to the early 1990s, and that shows that Deutsche are at their lowest since reunification. They’ve lost 90% of their value since 2007 (!)
On January 22, 1973, Deutsche Bank shares stood at the deutschemark equivalent of €10.289. Now at €10.315. Stocks for the long run.
12.10pm BST
12.03pm BST
Carlo Mareels of Mitsubishi UFJ, a financial services group, reckons that the markets have over-reacted to last night’s scoop about some hedge funds cutting their prime brokerage exposure to Deutsche Bank (DB).
He says:
“It is unexpected news to us, especially because it includes 10 different hedge funds which, we understand, would have made such a decision at the same time.
DB said yesterday that its prime brokerage is ‘still very profitable’ (CNBC) and that it had outflows, but also inflows. We are not sure why this decision would have been taken by all these hedge funds given that the risk of a liquidity crisis is very remote and the Central Banks are now much more on an alert than in 2007/8.”
[Anything higher] would appear excessively punitive given how other banks with larger initial settlement requests have ended up paying smaller amounts than $6bn.”
11.51am BST
City traders are expecting some turbulent days, as Deutsche Bank’s problems tumble on.
Paresh Davdra, CEO and Co-Founder of RationalFX, says currencies could be knocked, including the pound (which is currently below $1.30)
The next few days will not only be crucial for Deutsche bank, but also currencies across Europe. This morning’s news has already undermined the Pound, with the improvements seen this week impacted by market concerns over Deutsche Bank.
Continued instability will put great pressure on the fragile and unpredictable pound, and investors globally will be keeping a close eye not just on the German bank but on what happens to the Pound.”
11.43am BST
Your starter for 10....
I know which will get reported, but not sure which is more important: Deutsche Bank shares down 5% today, or up 5% from this morning's low?
11.41am BST
Credit Suisse have published a research note on Deutsche Bank this morning.
On the upside, CS argue that the slump in Deutsche’s share price is an overreaction, which “overstates the short-term litigation risk” from US authorities. They are confident that the DoJ will settle for a much lower amount than the opening offer of $14bn.
A capital shortfall of nearly €7bn still exists on a fully phased basis between the 2Q16 fully phased CET1 ratio of 10.8% and the 2018 management target of 12.5% (including just 25bps buffer over the 12.25% minimum; we think investors will demand nearer 13% on a sustainable basis).
With just a 5% ROTE in 2018 in the current revenue environment, even with no dividend in 2016/2017 and benefits from recent disposals we still think Deutsche Bank will struggle to meet its capital targets organically, especially if the sale of Postbank (which could add 20-70bps at 0.3-0.6x TBV) is delayed due to a low price in a low rate environment. We think this will keep the shares trading below 0.4x 2016E TBV.
11.24am BST
Has John Cryan dropped a hint that he may have news for Deutsche’s worried staff, in today’s memo?
Cryptic sign-off from John Cryan in email to Deutsche Bank employees. "You will hear back from me soon." pic.twitter.com/YIaaBo5sr9
11.10am BST
It’s early days...but it appears that the New York stock market may open calmly in three and a half hours despite the fears gripping the banking sector.
Despite a volatile start in Europe, Wall Street is currently looking to kick off the last trading session of the quarter as good as unchanged.
There are mounting fears over the state of Deutsche Bank and with this will come concern over the risk of contagion. The VIX is spiking higher too, but at least for now the market seems content that the slide we saw for US equities yesterday has been an appropriate adjustment.
11.04am BST
Here’s our latest news story on Deutsche Bank, for anyone just tuning in
Related: Market fears forces Deutsche Bank to issue assurances over financial health
11.03am BST
Earlier this week, John Cryan was in Arizona for Deutsche Bank’s 24th Annual Leveraged Finance Conference.
This tweet, from two days ago, confirms it:
#JohnCryan, CEO of #DeutscheBank, to take the stage at the bank's 24th Annual Leveraged Finance Conference in the US
Cryan has insisted the bank will not pay the $14bn the DoJ has demanded.
Under pressure from some analysts to accelerate his restructuring programme, Cryan is understood to be in the US, which might indicate that the bank is trying to further engage with the authorities.
10.46am BST
Here’s John Cryan’s email to Deutsche Bank’s staff, reassuring them about the bank’s financial health.
I have bolded up the most important bits.
10.24am BST
Let’s get back to Deutsche Bank.
“We should look at the complete picture.
“Deutsche Bank has more than 20 million customers.
Market sentiment continues to suffer as a result of recent Deutsche Bank woes, with the financial sector leading the race to the bottom this morning.
With the US Department of Justice aiming to also penalise Barclays and Credit Suisse alongside Deutsche [details here], there is a fear that we could see huge amounts of fines levied across the whole industry, effectively wiping out much of the safety buffers built up in case of emergency.
10.13am BST
Chancellor Philip Hammond has welcomed the news that Britain’s service sector grew at a faster pace in July (up from +0.3% to +0.4%), and that Q2’s growth rate has been revised up (from 0.6% to 0.7%)
“The UK started the year in a position of economic strength, and we can see today that this momentum has continued in the services sector – the largest part of our economy.
We want to build on this strength as we forge a new relationship with the EU and deliver an economy that works for all. The UK is well-positioned to deal with the challenges, and take advantage of the opportunities, that lie ahead.”
10.08am BST
Inflation across the eurozone has doubled, from 0.2% to 04% in September.
Eurostat reports that energy costs were less of a drag on the cost of living, as the oil prices has picked up recently.
10.03am BST
Economist Sam Tombs reckons the Bank of England now has less reason to cut interest rates again:
Monthly GDP index rose 0.3%m/m in July, thanks to 0.4% jump in services output. No immediate Brexit damage, so Nov. rate cut now in doubt. pic.twitter.com/pNYE3FpBvX
9.59am BST
City experts are hailing this morning’s UK data, and the latest signs that the Brexit vote hasn’t derailed the economy.
Alan Clarke of Scotiabank says the surge in service sector growth in July is significant:
Representing around ¾ of the economy, this was the first official output data for the sector to cover the post Brexit vote period. Services grew by 0.4% m/m, well above consensus, with the prior month also revised up for good measure.
So despite the Brexit vote and the anxiety surrounding it, it was business as usual in the services sector.
News that services output grew 0.4% month-on-month in July in the immediate aftermath of the Brexit vote is a significant boost to third quarter growth prospects; consequently we are lifting our third quarter growth estimate to 0.4% quarter-on-quarter from 0.3%.
Good news for UK economy: Q2 GDP (pre-ref) upgraded from 0.6% to 0.7%. And July services output (post-ref) up 0.4%, far stronger than exp
UK business investment grew 1%q/q in Q2, which is good, but let's not forget that it's been off the boil since mid-2015. pic.twitter.com/KCATbchSMY
9.50am BST
In further good news, Britain’s services sector output grew by 0.4% in July, up from 0.3% in June.
That suggests that the UK economy was not rocked badly by the results of June’s referendum, as well as growing strongly in the run-up to the vote.
“Despite some very weak indicators appearing in the immediate aftermath of the referendum, estimates gathered by ONS from more than 23,000 firms now suggest that the services sector – which accounts for three quarters of the economy – in fact grew strongly in July.
“Further information also suggests that the whole economy also grew slightly more strongly in the months before polling day than previously thought.”
9.39am BST
Newsflash from London: Britain’s economy performed better in the run-up to June’s EU referendum than first thought.
UK GDP grew by 0.7% in the second quarter of 2016, the Office for National Statistics says, up from a previous estimate of 0.6%.
9.31am BST
Deutsche Bank’s share prices has climbed back over the €10 mark, after John Cryan’s memo to staff was published.
But it’s still down almost 7% at €10.11.
LATEST: Deutsche Bank is strong and there's no basis for speculation, CEO John Cryan says https://t.co/nGy2ly11O7 pic.twitter.com/MEdwQIIMoe
9.29am BST
Reuters have now translated John Cryan’s memo into English.
Here’s the key quote from the Deutsche Bank boss, blaming market speculation for undermining the company:
“There are forces now under way in the market that want to weaken confidence in us,
Our job now is to ensure that this distorted perception does not more strongly influence our day-to-day business.”
9.17am BST
Newsflash: John Cryan, the chief executive of Deutsche Bank, has written a memo to staff insisting that the company has a strong foundation, and hitting out at speculators.
#BREAKING: Deutsche Bank CEO in letter to employees says market forces in action to undermine confidence in us - @Reuters
#BREAKING: Deutsche CEO - Uncertainty about US fine no basis for pressure on share price, when you look at settlements with rivals @Reuters
9.06am BST
Deutsche Bank’s problems would be less severe if it could reach a settlement with the US Department of Justice over the mis-selling of toxic mortgage securities a decade ago.
Deutsche has been under pressure since it emerged that the DoJ has proposed a $14bn penalty – much more than expected, and dwarfing the $6bn which the bank had set aside for misconduct.
There is no way the German government can agree state aid for Deutsche Bank until the exact sum of the fine to the US government is known https://t.co/yJVU3GjaTf
By grouping the three banks together into a single deal the DoJ hopes to achieve maximum public impact by collecting an eye-catching sum in penalties from the trio just weeks before the US presidential election.
8.55am BST
Every one of Europe’s financial stocks is falling this morning, as Deutsche Bank’s problems rattle the sector.
After a couple of days of relief the markets are back in the red, with Deutsche Bank continuing to position itself as the number one worry for investors.
A Bloomberg report yesterday evening claiming that 10 hedge funds had reduced their exposure to the German financial firm has sparked the latest round of heavy losses, with Deutsche Bank dropping between 9% after the bell. That drop has seen the bank dip below €10, effectively its worst price in 30 years.
8.45am BST
Analyst Marc Ostwald of ADM Investor Services agrees that Deutsche Bank isn’t the new Lehman:
The Deutsche Bank, and broader European banking concerns will also remain ‘front and central’ to proceedings, though the specific comparisons to Lehman look to be off target, in so far as Deutsche is a huge deposit taker (close to €600 Bln), is very clearly too big to fail, and has access to all the ECB funding facilities that have been established since the GFC [Great Financial Crisis].
As with Lehman, the key issue is far less its under-capitalization or solvency, and rather more the potential loss of access to liquidity.
Doing nothing is eminently no longer an option, and per se it needs to consider one or more of the following difficult options:
8.41am BST
Deutsche Bank’s struggles may sound like a repeat of the Lehman Brothers collapse, but there are some key differences.
For one, Deutsche can approach the European Central Bank for liquidity if it struggles (which would be embarrassing for such a large lender).
Two things to remember about Lehman Brothers:
1. It didn't have regular access to central bank liquidity.
2. The government let it fail.
If those conditions do not apply, you should not be talking about a "Lehman moment".
8.24am BST
Ouch! Deutsche Bank’s share price just slipped below the €10 mark for the first time in around 30 years.
Deutsche Bank shares briefly drop below €10. pic.twitter.com/lzxX0Xhv8o
8.23am BST
Germany’s DAX stock index has shed 1.6% in early trading, led by bank stocks, and France’s CAC is down by 1.7%.
8.19am BST
Almost every share has fallen in London this morning; the only risers are precious metals producers Randgold and Fresnillo.
Financial stocks are being badly rattled by the situation at Deutsche:
8.09am BST
Shares in Deutsche Bank have slumped by 7% at the start of trading in Frankfurt.
They hit a low of €10.07, the lowest since the mid-1980s, echoing last night’s selloff in New York.
8.05am BST
London’s stock market is bathed in red at the start of trading, as Deutsche Bank fears ripple through the City.
The FTSE 100 index has shed 89 points, or 1.3%, to 6830.
7.57am BST
Worries over Deutsche Bank rippled through Asia’s stock markets overnight.
The Japanese Nikkei dropped by 1.5%, as investors digested the news that 10 hedge funds (out of 200) had cut their exposure to Deutsche.
While these firms represent a fairly small part of the banks clients, as a weather vane in the current febrile environment, it doesn’t exactly represent a vote of confidence either, and sent the US listed shares of the bank to a record low.
7.42am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Deutsche Bank called 6% lower in pre-market
Eurostoxx 50 futures down -1.5% in early European trading https://t.co/ZChOMeISVO
The report forced the chairman of Deutsche’s hedge fund business, Barry Bausano, to take to the airwaves to reassure the market. He told CNBC that Deutsche, its prime brokerage division, which services hedge funds, was “still very profitable” but said there was “no question we have a perception issue”.
Deutsche, which has had been quick to deny reports it needed help from the German government, released a statement on Thursday to reassure investors that the majority of its clients were sticking with the bank.
Related: Deutsche Bank's share price approaches 30-year low
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