Deutsche Bank fears rattle stock market as shares open at record low in Europe

Chief executive of bank says 'new rumours' causing share price to fall

Zlata Rodionova
Friday 30 September 2016 17:26
Deutsche Bank's headquarters in Frankfurt, Germany
Deutsche Bank's headquarters in Frankfurt, Germany

Concerns about Deutsche Bank’s health have rattled Europe’s financial stocks on Friday morning as the bank's shares hit new lows.

Deutsche Bank’s shares extended losses overnight in New York trading, taking the bank’s share price below €10 (£8.60) for the first time ever on Friday morning.

Deutsche's woes hit bank shares across Europe with Lloyds Banking group, Barclays and Royal Bank of Scotland all falling by more than 4 per cent per cent at the start of trading in London.

Commerzbank, Germany's second-biggest lender, was down by nearly 6 per cent.

Swiss, French and Italian banks were down by about the same amount.

“Understandably the European markets are rattled. The FTSE has now lost all of the 2016-high grazing growth it managed yesterday, falling back below 6850 in part thanks to the near 5 per cent declines seen by Barclays and RBS,” Conner Campbell of SpreadEx said.

“The DAX, meanwhile, dropped by nearly 200 points, with the CAC the worst performing major index at a 2.1pc slide thanks to the heavy losses incurred by BNP Paribas, Credit Agricole and Societe Generale,” he added.

John Cryan, the chief executive of Deutsche Bank, has written a memo to the 100,000 staff insisting that the company has a strong foundation, in an attempt to reassure them that the bank's finances are strong.

“There are forces now under way in the markets that want to weaken confidence in us,” Cryan said.

“Our job now is to ensure that this distorted perception does not more strongly influence our day-to-day business,” he added.

On Wednesday, the German government has denied it is considering injecting billions of euros into Deutsche Bank, following reports from a German newspaper it was preparing an emergency rescue package.

Deutsche has been under pressure since it emerged that the US Department of Justice (DoJ) has proposed a $14 billion (£10.6 bn) fine to settle civil claims regarding its handling of mortgage-backed securities that contributed to the 2008 financial crisis.

The German-based bank is among many financial institutions investigated over dealings in discreditable mortgages in the run-up to the financial crisis. The government has accused the banks of misleading investors about the quality of their loans.

Deutsche Bank has lost about 43 per cent of its market value this year. Net income decreased to €18 million (£15m) from €796 million a year earlier.

John Cryan, has been cutting risky assets, freezing dividend payments and eliminating about 9,000 staff to boost capital levels.

In June, the International Monetary Fund (IMF) said that of the banks big enough to bring the financial system crashing down, Deutsche Bank was the riskiest.

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