Investors dump Deutsche Bank shares

Deutsche Bank shares slumped by over 6 percent on Monday, reflecting growing investor concerns over the massive financial cost facing the bank on account of its legal wrangles with US regulators.

At one point in the session, Deutsche Bank shares stood at 10.63 euros, a historic low. The shares were one of the worst performers on the German stock market on Monday.

The selloff came after a weekend report in the German news weekly "Focus" suggested that German Chancellor Angela Merkel had ruled out any chance of offering state aid to the embattled financial institution or interceding with US authorities on behalf of the bank.

News broke out earlier in September that US regulators were seeking a $14-billion penalty from Deutsche Bank (12.4 billion euros) over its malpractices leading up to the subprime mortgage crisis in 2008.

And in the near term, investors fear that even if Deutsche negotiates a much lower deal with the US Department of Justice (DoJ), the looming fine will still exceed the $5.5 billion the bank has set aside to cover its roughly 8,000 open legal cases.

No help required?

Even if the bank manages to negotiate a settlement with the DoJ, it is still under investigation by the New York Department of Financial Services over alleged money laundering in the bank's Russian arm.

Deutsche responded to the "Focus" report on Monday by saying it did not require assistance from Berlin and had not requested it.

"John Cryan at no point asked the German Chancellor for the government to intervene in the US Justice Department's mortgages case," a Deutsche Bank spokesman said, adding that the lender would meet its challenges on its own.

Analysts believe, given Deutsche's systemic importance for the German economy, it would be highly unlikely for the government in Berlin to allow the bank to fail.

 With around $2 trillion of assets on its balance sheet, Deutsche Bank is "too important for the German economy" and for the government to allow it to fail, Andreas Utermann, chief investment officer at Allianz Global Investors, told Bloomberg Television on Monday.

Expecting a 'fair result'

Meanwhile, German government spokesman Steffen Seibert said there were no grounds for speculating about government assistance to Deutsche Bank.

"There is no reason for such speculation as presented there and the federal government doesn't engage in such speculation," Seibert said during a regular government news conference.

The German government was aware that the US DoJ had settled with other banks in the past and Berlin expected a "fair result" would also be achieved in Deutsche Bank's case, he said.

Seibert, however, declined to comment on whether there had been any contact between Deutsche Bank and the German government. Merkel regularly held talks with senior business figures, he said.

Deutsche Bank's stock has lost half of its value on the Frankfurt Stock Exchange since January, after the lender booked an almost 7.0-billion euro loss in 2015.

sri/hg (AFP, Reuters, dpa)