Deutsche Bank shares recover on support from clients, rivals

Shares in Deutsche Bank rose as much as 3.5 percent on Tuesday after major clients and even rivals voiced support for the lender, fearing contagion after concern over its future last week sent the stock to a record low.
Investors have lost trust in Deutsche Bank as hopes have faded of a swift deal with US authorities over a multi-billion-dollar penalty.
The German bank is throwing its energies into reaching a settlement before next month’s US presidential election, with the Department of Justice demanding a fine of up to $14 billion for mis-selling mortgage-backed securities.
CEO John Cryan and finance head Marcus Schenck are currently traveling to the US to meet clients and staff and to attend the annual conference of the International Monetary Fund.
While their program has not been made public, a person close to the bank said that it would be a surprise if Cryan did not take the chance to meet regulators over Deutsche’s legal cases.
German Finance Minister Wolfgang Schaeuble is also scheduled to attend the IMF meeting and may use his visit to Washington to lobby for a favorable outcome for Deutsche Bank. The German government has denied reports it has a rescue plan for the bank.
A media report late on Friday that Deutsche and the DOJ were close to agreeing a much lower penalty of $5.4 billion lifted the stock 6 percent, but that report remains unconfirmed.
Over the weekend, which included a public holiday on Monday, German business leaders from companies including BASF , Daimler, E.ON, RWE and Siemens lined up to defend the bank in the German press.
Separately, JP Morgan CEO Jamie Dimon said late on Monday that he saw no reason that Deutsche Bank should not get over its problems.
While Dimon’s remarks lent some calm to the market, they showed his concerns about potential contagion in the banking industry, market analyst Heino Ruland at Ruland Research said.
Analysts at HSBC said that despite Deutsche’s operational shortcomings fears over the bank’s solvency were overdone.
“Deutsche Bank should be well-equipped to deal with this short-term lack of confidence as it has: strong liquidity, solid funding and 60 percent level 3 assets to tangible equity,” HSBC said in a note to clients reducing its target price to 12 euros from 14 but keeping its “hold” recommendation.
Deutsche Bank shares traded up 2.3 percent at 11.84 euros by 1409 GMT.
The number of shares in Deutsche Bank out on loan to hedge funds and others to either hedge against or profit from a further fall in the price hit a more than one-year high of 5.6 percent on Monday, according to data provider Markit.

Source: Arab News