​Deutsche Bank shares spike on US settlement reports, as FTSE 100 enjoys best quarter since 2013

Deutsche Bank headquarters, Frankfurt
Deutsche Bank headquarters, Frankfurt

    It’s been a week to forget for German lender Deutsche Bank as concerns about the bank’s stability took centre stage. Shares have plunged by almost 30pc in just three weeks because of a $14bn fine proposed by the US Department of Justice earlier this month for mis-selling mortgage backed securities.

    The German flagship bank’s value has more than halved in value this year after it posted its first full-year loss since 2008 in January. The IMF also warned in June that Deutsche’s links to the world's largest lenders make it a bigger potential risk to the wider financial system than any other global bank.

    Here’s how Deutsche’s week of doom unfolded:

    Monday: Merkel rules out state aid

    Shares in the German lender were sent into a tailspin, touching record lows, after reports emerged last weekend that Germany’s Chancellor Angela Merkel had ruled out any state assistance for the lender.

    German magazine Focus suggested that Chancellor Merkel met Deutsche's chief executive John Cryan over the summer and had indicated he could expect no help from Berlin in resolving the bank's dispute with the US Department of Justice.

    However, the German lender denied such reports, with the bank's spokesman, saying:

    "John Cryan at no point asked the German Chancellor for the government to intervene in the U.S. Justice Department's mortgages case." It also said it would meet its challenges on its own.

    "There is currently no question of a capital increase. We are meeting all regulatory requirements," the spokesman added.

    Tuesday: Deutsche - the next Lehman Brothers? 

    Deutsche Bank extends its slide after German Chancellor Angela Merkel told reporters in Berlin she hopes the problems at Deutsche Bank can be solved.

    When asked about Deutsche Bank and if the government was considering assistance for the lender, Chancellor Merkel said:

    "I only want to say that Deutsche Bank is a part of the German banking and financial sector. And of course we hope that all companies, also if they face temporary problems, can develop in the right direction.

    "I don't want to comment beyond that."

    Talk of Deutsche Bank becoming the next Lehman Brothers rattled the banking sector.

    Wednesday: State aid 'out of question', says Cryan

    Deutsche Bank chief executive John Cryan refutes claims the lender sought the assistance of the German government in settling its $14bn US demand  in an interview with German daily Bild. He says a request for state aid would be “out of the question for us”, adding that he could not understand how "anyone could claim that."

    "At no point did I ask the chancellor for support. Neither did I suggest anything like that,” Cryan said.

    Deutsche Bank announces that it has sold its British insurance business Abbey Life Assurance for £935m to Phoenix Group Holdings.

    German national weekly newspaper Die Zeit reports that the German government and financial authorities are preparing a rescue plan for Deutsche Bank. They suggest a rescue plan would come into force if Deutsche Bank needed extra capital and was not able to raise it on the market. It also added that the government would take a stake in Deutsche Bank in the worst case scenario.

    Bafin, the German financial regulator denies claims it is not working on a contingency plan for Deutsche Bank.

    The German finance ministry also refute claims made by the Die Ziet that it is preparing a rescue plan for the German lender. "This report is false," spokeswoman Nadine Kalwey wrote in an emailed statement. "The federal government is preparing no rescue plans. There is no reason for such speculation. The bank has said that clearly."

    Speculation among analysts grows about the fine Deutsche Bank will eventually pay, with estimates from $200m to $5.5bn suggested.

    Thursday: Hedge funds trim exposure

    A report from Bloomberg suggests that that a number of hedge funds that clear derivatives trades with Deutsche Bank have withdrawn some excess cash and adjusted positions.

    Reuters reports that one large hedge fund in Asia had pulled out its collateral from Deutsche amounting to $50 million in the last two days.

    A spokesman for Deutsche Bank says that it is confident the vast majority of trading clients understand the group has a stable financial position.

    Friday: Shares plunge below €10​ for first time ever

    Shares plunge below €10 for the first time ever. The cost of insuring Deutsche Bank's debt against default jumped by 21 basis points.

    Italy's economy minister urges for a quick answer to the problems of German lender Deutsche Bank. In a newspaper interview today, Pier Carlo Padoan said it was in everyone's interest "to look for solutions that must then be carefully handled".

    Deutsche's 'CoCo' bonds slump to a record low, with the 6pc coupon CoCo trading as low as 69.55 cents on the euro -- down from 83 cents earlier in September. 

    A German government spokesman tells reporters Chancellor Angela Merkel and US President Barack Obama did not discuss Deutsche Bank's $14bn fine during a telephone call on Thursday. 

    Deutsche's chief executive John Cryan issues a letter to employees as he attempts to assuage fears about the bank’s health. He tells staff:

    “We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.

    “Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.” He reassures staff that Deutsche Bank is and remains “strong”.

    European listed shares turn positive in afternoon trade and US-listed shares jump 7pc amid reports it is nearing a $5.4bn with the US Department of Justice. 

                                                                                                        

    Markets report: FTSE 100 enjoys best quarter since 2013, as Deutsche Bank rallies on reports it is nearing a $5.4bn US settlement

    The FTSE 100 enjoyed its best quarterly performance in three-and-a-half years, as Britain’s blue chip companies continued to demonstrate their resilience to the Brexit vote.

    In the three months that followed the shock decision to leave the EU, London’s blue chip index jumped 6.07pc, that’s its best quarterly performance since the quarter ended March 29 2013. Chris Beauchamp, of IG, said it wasn’t surprising to see some “last minute rallies in risk assets” at the end of the quarter, as institutional investors moved to “spruce up” their portfolios.

    However, the buoyancy of the FTSE’s quarterly performance was largely overshadowed by the beleaguered Deutsche Bank. It’s share price endured a tumultuous trading session, swinging between losses of 9pc and gains of 8pc. Reports hedge funds were trimming their exposure to Germany’s flagship lender rattled the banking sector in early trade, but hopes the bank was nearing a deal with the US to slash its fine to $5.4bn for mis-selling mortgage-backed securities eased the sector’s losses. On the day, the FTSE 100 dipped 20.09 points, or 0.29pc, to 6,899.33, with Lloyds losing 1p to 54.6p. Its peers managed to claw their way back into positive territory - Barclays rose 0.5p to 167.8p, HSBC rose 0.4p to 578.7p and Royal Bank of Scotland inched up 1.7p ot 178.8p.

    Separately, UBS cut Lloyd’s target price to 65p from 68p amid expectations its capital generation for the second half of the year will “disappoint”.

    Capita found itself among the laggards for a second consecutive trading session following Thursday’s profit warning, as brokers issued a slew of bearish notes. Shares fell 28p to 670p. Although Goldman Sachs sees “limited” read-across for its peer Babcock International, shares extended their slide, down 11p to £10.35.

    Elsewhere, Burberry climbed 26p to £13.79 after RBC Capital Markets hiked its price target by £2 to £14 and raised its rating to “sector perform”. Analysts think the luxury fashion house is moving faster than its peers to adapt to millennial consumer behaviour changes.

    Builders’ merchant Travis Perkins also edged 28p upwards to £15.44 on the back of a bullish note from Credit Suisse. The investment bank lifted its price target to £19.50 from £16.50, as it sees an “increasingly favourable market backdrop” for the FTSE 100 stock, and a return of price growth in 2017. 

    On the mid-cap index, Peppa Pig owner Entertainment One leapt 13.3p to 226.4p amid expectations its full-year financial performance will be in line with management’s estimates. Meanwhile, at its annual general meeting 11.4pc voted against the directors’ pay report.

    Finally, a strong trading update from iomart Group pushed shares 1p higher to 278p. The group said it is “confident” in the outlook thanks to strong demand for its services as enterprises continue to shift towards cloud-based infrastructure.

    On that note, it's time to close up. Thanks for following our markets coverage this week. 

    US-listed Deutsche  Bank shares on track for best day in five years

    US-listed Deutsche Bank shares are now on track for their best day since October 2011 amid reports the beleaguered bank is nearing a settlement with the US Department of Justice. 

    Shares leapt 14.1pc on Wall Street. Meanwhile, European-listed shares closed up 6.4pc, having plunged almost 9pc in early trade. 

    Credit: Bloomberg

    Morgan Stanley sees Deutsche Bank settlement at $6bn

    Despite reports from AFP suggesting Deutsche Bank is nearing it a $5.4bn settlement with the US Department of Justice, Morgan Stanley reckons the fine will be a little higher than that - around the $6bn mark. 

    Deutsche Bank shares endure rollercoaster 15pc swing in one day

    Panmure Gordon's David Buik highlights that Deutsche Bank shares have endured a rollercoaster swing of more than 15pc today. 

    German FinMin declines comment on report Deutsche near US settlement

    Germany's Finance Ministry declined to comment on Friday on a report that Deutsche Bank  was close to a $5.4 billion settlement with US authorities over alleged misselling of mortgage-backed securities.

    "We have no comment on this," Finance Ministry spokesman Juerg Weissgerber said in an emailed comment to Reuters.

    Agence France Presse reported that Deutsche Bank was near a $5.4 billion settlement with the U.S. Department of Justice. News last week that the US government would levy a fine as high as $14 billion sent Deutsche's share price plummeting to record lows.

    Report from Reuters

    European bourses stage recovery on reports of Deutsche's deal to slash fine

    Reports that Deutsche Bank may be about to strike a deal to slash its $14bn fine in relation to mis-selling mortgages to $5.4bn lifted European bourses from the doldrums after a rollercoaster trading session. 

    By close of play: 

    • FTSE 100: -0.29pc
    • DAX: +1.01pc
    • CAC 40: +0.1pc
    • IBEX: -0.19pc

    Shares jump 6pc on reports Deutsche is nearing a settlement

    AFP have suggested that Deutsche Bank is nearing a $5.4bn settlement relating the mis-selling of mortgages. 

    After plunging 6pc earlier today, Deutsche Bank shares are now up 6pc and US-listed shares have jumped 13pc. 

    Reuters also reports that Deutsche Bank has declined to comment on the AFP report that it is close to reaching a settlement with the US Department of Justice. 

    Credit: Bloomberg

     Volatile week leaves pessimists disappointed

    A relatively calm end to the week belies the choppiness and volatility that has dominated markets over the past five sessions, Chris Beauchamp, of IG, said this afternoon. 

    "The culprits are not difficult to find; OPEC and Deutsche Bank, with the majority of attention fixed on the latter. 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 come Monday."

    Rumour mill suggest Deutsche's fine will be announced this weekend as $5.4bn

    If you're wondering why Deutsche's shares have made a miraculous recovery today, it's because of the City rumour mill. 

    After plunging almost 9pc, shares are now trading 1pc higher on the day - almost touching €11. It comes amid reports that Deutsche's fine might be announced as soon as this weekend. 

    Jasper Lawler, of CMC Markets, said: "Deutsche Bank shares recovered all of the day’s sharp losses on rumours the fine will be announced at the weekend as $5.4bn. Even at $5.4bn, Deutsche Bank would likely to raise capital, though the size may make a rights issue more palatable and makes a government bailout much less likely."

    Here's a look at how Deutsche Bank has performed so far today: 

    Credit: Bloomberg

    Deutsche Bank boss reassures staff about firm's health as hits out at 'forces in the market' 

    Here's our full report on Deutsche Bank by Marion Dakers: 

    Deutsche Bank’s chief executive has sought to reassure staff that the German lender is solid despite waning confidence in the market that has sent its shares to a fresh record-breaking low.  

    John Cryan hit out at short-sellers who were betting on the share price falling further and told staff that the bank had an “extremely comfortable” buffer of liquid assets.

    "There are forces now under way in the market that want to weaken confidence in us," said Mr Cryan in a letter to employees.

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

    Mr Cryan was reacting to a 7pc slump in Deutsche’s US-listed stock overnight following a report that some hedge funds were pulling their derivative holdings and collateral from the bank.

    Frankfurt-listed shares in Germany’s largest bank continued the decline, losing more than 4pc in morning trading and briefly slipping below €10 for the first time, as analysts tried to survey the potential damage to the bank from an expected US fine for mis-selling mortgage-backed securities.

    Deutsche's contingent convertible bonds, designed to wipe out holders in a crisis in order to avoid a state bailout, have followed the bank's shares to record lows.

    The Department of Justice hinted in mid-September that it wanted to impose a $14bn penalty on the bank, which would wipe out Deutsche's current €5.5bn provision for lawsuits and penalties.

    Continue reading here

    Deutsche Bank short-interest spikes

    Data from Astec Analytics showed that short-selling in Deutsche Bank spiked this week with total shares on loan hitting 42.5m yesterday. 

    US-listed Deutsche Bank shares jump 6.1pc 

    While DB shares plunged almost 9pc at the European opening call, stateside it was a different story. US-listed Deutsche Bank shares jumped 6.1pc on Wall Street. 

    Credit: Bloomberg

    Deutsche Bank shares turn positive (briefly)

    Deutsche Bank shares turned positive this afternoon before dipping back into the red, having plunged by almost 9pc in early trade. 

    Shares rose 0.5pc, before dipping lower, and is now trading down 0.6pc on the day. 

    US stock open higher on the last trading day of the quarter

    In a stark contrast to the European opening call, US stocks have opened higher this afternoon - led higher by financial stocks. 

    At the opening bell: 

    • Dow Jones: +0.59pc
    • S&P 500: +0.48pc
    • Nasdaq:+0.42pc

    Deutsche Bank must survive without state aid 

    Eurogroup President Jeroen Dijsselbloem said on Friday that Deutsche Bank must survive "on its own", without assistance from the German state.

    Dijsselbloem's spokesman Michel Reijns confirmed the remarks made to reporters on Friday outside the weekly Dutch Cabinet meeting.

    Report from Reuters

    Can Wall Street avoid the Deutsche drama?

    Looking ahead to the opening call on Wall Street, Connor Campbell, of SpreadExreckons the Dow Jones can once again avoid the Deutsche Bank drama, as futures point to a positive opening. 

    "The Dow has quite a bit of B-tier data to deal with this afternoon; the core PCE price index, personal spending and personal income figures all arrive before the bell, while the Chicago PMI and revised UoM consumer sentiment and inflation expectations readings are released later in the afternoon."

    Deutsche Bank shares down just 2.8pc after 9pc plunge

    Deutsche Bank shares continue to edge upwards. They are currently off by just 2.8pc - up from an earlier slide of almost 9pc. 

    Here's a look at the stock price's rollercoaster week: 

    Credit: Bloomberg

     Some analysts have questioned the slight recovery in the stock price today: 

    JP Morgan calls for Deutsche to pre-announce Q3 results and speed up DoJ settlement

    Carl Quintanilla, of CNBC, flags more commentary from JP Morgan. The US investment bank said if Deutsche Bank pre-announced its third quarter results and accelerated its negotiations with the Department of Justice - it might help assuage investors fears about the bank's health. 

    Cryan v Fuld

    Comparisons between Deutsche and Lehman's have been doing the rounds all week. But this morning's message from Deutsche Bank chief executive John Cryan is causing a bit of a stir - some have gone so far as pull out that infamous clip of Dick Fuld, chief executive of Lehman Brothers before it failed. 

    This morning Mr Cryan said: "Some forces in the markets are currently trying to damage this trust." 

    In June, the IMF warned Deutsche Bank was a bigger potential risk than other banks to financial system 

    Interesting reminder from Reuters' Jamie McGeever. He flags that back in June the IMF warned that Deutsche Bank was a bigger potential risk to the global financial risks than other banks. 

    At the time, the IMF compared possible threats to financial stability stemming from globally systemically important banks, known as "G-SIBs", in a review of Germany's banking and insurance sector.

    It found: "Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse.

    "The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures."  

    Deutsche's CoCo bonds slump to record low

    Deutsche's 'CoCo' bonds slumped to a record low today, with the 6 percent coupon CoCo trading as low as 69.55 cents on the euro -- down from 83 cents earlier in September.

    Contingent convertible bonds, known as CoCos, are converted into equity when a bank's capital level falls below a certain threshold.

    Meanwhile, data from Markit showed that some hedge funds stand to benefit from the Deutsche Bank share price slide, as they have taken short positions (effectively betting the stock price will fall further). The data showed 3.95pc of Deutsche's stock was out on loan as of yesterday. 

    Price action overstates the short-term litigation risk, says Credit Suisse

    Credit Suisse reminds us that in cases similar to the one Deutsche Bank is facing, its peers have agreed a settlement which is "much smaller" than the initial fine. 

    Jon Peace, of Credit Suisse, said: "We think the price action overstates the short-term litigation risk which has been the main source of concern since the US DOJ suggested DBK could settle its RMBS litigation for USD14bn.

    Credit: Credit Suisse

    "As in similar cases such as Goldman Sachs and Citigroup, we expect the ultimate settlement to be much smaller and in proportion with peers. We have modelled cE4bn for this issue, and note that cE3bn of DBK’s E5.5bn of litigation reserves are for US RMBS litigation and DBK’s phased-in CET1 ratio of 12.2pc is almost E6bn ahead of the phased-in ECB requirement of 10.75pc (a capital shortfall still exists on a fully phased basis of cE7bn before any additional litigation provisioning or disposals).

    "However even if the US RMBS litigation is settled at reasonable levels, other cases (including Russia and FX) could create additional headline risks and will weigh on core capital generation over 2H16-2018."

    German bank holiday on Monday 

    It's also worth noting that it's a bank holiday on Monday in Germany to mark Unity Day.... so expect trading to be a lot quieter. 

    Deutsche Bank shares tank to levels last seen in 1973

    James Mackintosh, of the Wall Street Journal, has worked out that Deutsche Bank's share price today hit levels last seen in January 1973. 

    Market update: European bourses pare losses as Deutsche saga rumbles on 

    Deutsche Bank continued to dominate sentiment across global financial markets this morning, prompting a sell-off across Europe, after a report suggested hedge funds were trimming their exposure to the German lender. 

    However, after falling heavily in early trade, European bourses have pared their losses. 

    • FTSE 100: -0.9pc
    • DAX: -1.1pc
    • CAC 40: -1.4pc
    • IBEX: -1.7pc

     Connor Campbell, of SpreadExsaid: "While still deep in the red, the excessive losses seen by the European markets have cooled somewhat as lunchtime approached.

    "The release of a memo from Deutsche Bank CEO John Cryan to his staff seems to have taken the edge off of the German company’s dramatic decline this Friday. In it Cryan insisted that the fears surrounding the bank’s financial health were misplaced, pointing to the €215 billion it holds in liquidity reserves alongside the €1 billion it earned in half year pre-tax profit during the first 6 months of 2016 as examples of its ability to weather the storm it has found itself in since the $14 billion Department of Justice fine was revealed. This helped Deutsche Bank more than halve its morning losses, with the company now down less than 4% and, crucially, back above the €10 mark." 

    A settlement with US DoJ needs to be reached 'relatively quickly', says JP Morgan 

    In a note published this morning, analysts at JP Morgan said they believe any decision by Deutsche Bank to raise capital is not going to be triggered by the actual US RMBS settlement, but rather if there is a loss of client revenues. 

    Here are the three potential outcomes, according to JP Morgan: 

    1. DB settles US RMBS at an amount inline with our expected level of $3-4bn leading to no capital raise;
    2. The DOJ demands significantly more than c$4bn which DB would be reluctant to accept in our view as it would otherwise trigger a capital raise;
    3. The most difficult to assess, in a worse case scenario is DB being forced to raise equity due to client revenue loss.

    Interestingly, the investment bank highlights that Deutsche Bank has $6.2bn litigation reserves at June 2016. 

    Analysts added: "We conservatively assume $5.4bn is used to settle litigation issues other than RMBS, such as Russia and hence a settlement on RMBS above $4bn would imply DB’s current reserves would not be enough and it would have to replenish its reserves, thus putting capital at risk.

    "We believe a settlement may need to be reached relatively quickly to avoid business impact."

    Merkel and Obama did not discuss Deutsche bank in Thursday call 

    German Chancellor Angela Merkel and US President Barack Obama did not discuss Deutsche Bank being fined $14bn by the US DoJ, in relation to mis-selling mortgage backed securities, during a telephone call on Thursday, a German spokesman said today. 

    "The conversation with Obama concerned Ukraine and Syria, and was not about other issues," the spokesman told a regular government news conference in Berlin when asked whether the US demand was raised during the phone call.

    US President Barack Obama and German Chancellor Angela Merkel did not discuss Deutsche Bank's woes during a telephone conversation yesterday, a spokesman said 

    Frankfurt's DAX on track for worst week in five months

    The German DAX is heading for its worst weekly performance in five months, as concerns over the stability of Deutsche Bank continue to rattle stocks. 

    Frankfurt's DAX has fallen 3.03pc so far this week - that's its biggest fall since the week ended April 29, when it tumbled 3.22pc.

    Frankfurt's DAX on track for its worst week since April Credit: Bloomberg

    Economy grew faster than expected before the referendum

    Back to the Q2 UK GDP, here's our full report from economics correspondent Tim Wallace: 

    Britain’s economy grew faster than previously thought in the second quarter of the year, as GDP expanded by 0.7pc ratherthan the 0.6pc initially estimated.

    Business investment drove the improvement, jumping by 1pc in the three months to June, the Office for National Statistics said – double its earlier estimate.

    Consumer spending also increased strongly, rising 0.9pc in the run-up to the EU referendum in June. Household consumption increased by 3pc compared with the same period of 2015.

    A weak trade performance weighed on growth, however, as the current account deficit widened and net trade took 0.8 percentage points off the GDP figure – something that may have been partially addressed in the third quarter as the pound has fallen sharply, making imports more expensive.

    The ONS also said that early signals indicate the economy continued to grow well following the referendum at the end of June.

    Read more here

    RBC cutting 15 investment banking jobs in London

    Staying with the banking sector, rumours are circulating the City that Royal Bank of Canada is axing 15 investment banking jobs. Reuters has the details: 

    Royal Bank of Canada (RBC) is cutting 15 investment banking jobs in London amid a slowdown in activity in the region, sources familiar with the matter told Reuters.

    RBC Capital Markets, the investment banking arm of RBC has in recent years made a series of senior hires in Europe, in an attempt to beef up its mergers and acquisitions (M&A) and equity capital markets (ECM) franchise in the region, where it employs around 200 people in the division.

    Investment banks around the world have been grappling with a reduction in activity so far this year, amid worries about a slowdown in China, volatile oil prices and Britain's vote to leave the European Union in June.

    M&A activity in Europe is down 19 percent to $484 billion (£373.34 billion) so far this year compared to last, Thomson Reuters data shows.

    No surprise Deutsche fears german-ate 

    Commenting on this morning's tumultuous trading session, Mike van Dulken, of Accendo Markets, said: 

    "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. Contagion fears that were denting financial peers may have eased but of course remain ready to pounce on the next negative DBK soundbite. Efforts to rekindle OPEC production-cut  excitement have already run their course, oil prices back from overnight highs hindered by fresh USD strength linked to safehaven seeking, an additional weight on reduced risk appetite within the commodity sector excl Gold. The FTSE100 sell-off has found support and bounced off post-Brexit rising support at 6810." 

    Deutsche Bank's liquidity position better than BNP and Citi's, says Goldman Sachs

    In a note released this morning, Goldman Sachs has highlighted that Deutsche Bank's liquidity position i s better compared to BNP or Citigroup. 

    Deutsche Bank: A message to employees from John Cryan

    John Cryan, Deutsche Bank CEO, sent out the following message to the Bank’s employees on Friday September 30, 2016: 

    Dear Colleagues,

    You will have seen speculation in the media that a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns. We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.

    I understand if you feel concerned by the extensive coverage on this issue. Our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price.

    It is our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.

    Deutsche Bank has strong fundamentals. Let me mention some of the most important facts at this point:

    1. We fulfil all current capital requirements and our restructuring is well on track. We completed the disposal of the British insurer Abbey Life this week and the sale of our stake in the Chinese Hua Xia Bank will be finalised soon. This will further improve our capital ratio.
    2. We have significantly decreased our market and credit risk in recent years. At no point in the last two decades has the balance sheet of Deutsche Bank been as stable as it is today.
    3. Despite low interest rates and a difficult environment we posted a pre-tax profit of about 1 billion euros in the first half of 2016. Before extraordinary items like restructuring costs, we earned about 1.7 billion euros. This demonstrates the operating strength of Deutsche Bank.
    4. In a situation like this, the most important factor is our liquidity reserves. Currently they still amount to more than 215 billion euros. This is an extremely comfortable buffer. This is clear proof of how conservatively we have planned. This is acknowledged by numerous banking analysts. There is therefore no basis for this speculation. Nor can uncertainty about the outcome of our litigation cases in the US explain this pressure on our stock price, if we take the settlements of our peers as a benchmark.

    You have all done a tremendous job over the past few days. You are the ones who are in constant contact with our clients and making it clear how Deutsche Bank is really doing. You are Deutsche Bank – that is impressively clear. All of us in the Management Board highly appreciate it.

    You will hear back from me soon. Please keep working as you have been doing so far. We are and we remain a strong Deutsche Bank.

    Yours sincerely,

    John Cryan

    Here's the link to the letter posted on the bank's website

    Deutsche pares losses; back above €10

    After a torrid start to the day, Deutsche Bank has pared its losses and is back up trading above the €10 mark. 

    At the opening bell, shares plunged by almost 9pc to a new record low of €9.89 on reports some hedge funds have started trimming their exposure to the German lender. 

    However, after John Cryan's attempts to assuage investors fears, by stating Deutsche is and "remains a strong" bank, in an internal memo circulated to staff this morning. 

    Shares have now edged back up to €10.37 - but are still down 4.6pc on the day. 

    Credit: Bloomberg

    'We should look at the complete picture', says Deutsche's Cryan 

    More from that internal memo circulated within Deutsche Bank by chief executive John Cryan as he attempts to assuage the fears of employees amid the bank's latest share price plunge on worries some hedge funds are trimming their exposure to the bank. 

    He described the latest reports about the German lender as "unsettling media coverage". 

    Mr Cryan said: 

    "We should look at the complete picture. 

    "Deutsche Bank has more than 20 million customers."

    "We are and remain a strong Deutsche Bank."

    (Quotes courtesy of Reuters) 

    John Cryan, Deutsche Bank's chief executive 

    RBS brand to be confined to Scotland in ring-fencing plans

    As banking stocks tumble under the pressure of Deutsche bank, Royal Bank of Scotland has unveiled sweeping structural reforms ahead of new rules to separate its retail operations from riskier parts of the business. Tom Ough reports: 

    The Royal Bank of Scotland brand will largely be confined to Scotland, with the NatWest name replacing it in England and Wales, the bank has announced.

    RBS said on Friday that its ring-fenced bank would be called NatWest Holdings, and will comprise its core NatWest, Coutts & Co, Ulster Bank and Ulster Bank Ireland DAC brands.

    By the end of 2018, RBS'  Adam & Company unit, which houses its Scottish private bank, will be renamed Royal Bank of Scotland Plc as part of the changes - though the Adam & Co brand will still remain. Its Corporate and Institutional Banking business will be held in a non ring-fenced entity called NatWest Markets, and its Channel Islands operations will also sit outside the ring-fence. 

    NatWest will become the main customer-facing brand in England, Wales and Western Europe, the bank said, while Royal Bank of Scotland will play the same role in Scotland.

    Continue reading here

    Stress in markets is 'not related' to Deutsche Bank's liquidity situation 

    While talks of a potential, Lehman-like systemic risk are mainly speculative, Ipek Ozkardeskaya, of London Capital Group, says from what we know at this time, the stress in the markets "is not related to Deutsche Bank’s liquidity situation, yet the ability of the market to finance DB’s debt over the next 9 to 18 months".

    "Of course, some already expect the governments to step in to ease tensions. For the moment, the stress in the financial complex is acceptable, and does not require any immediate action from the governments. Of course, if things get worse, we could well expect a preventive action to avoid the possibility of a systemic risk.

    "While we do not rule out the possibility of renewed tension in the financial markets, the amplitude of such a scenario is hard to price in. We are already in a low-rate, post-crisis environment as the result of the 2007-2008 subprime crisis. The financial markets are certainly not well armoured to face another financial crisis."

    UK Q2 GDP revised up to 0.7pc

    Moving away from Deutsche Bank, second quarter UK GDP has been revised upwards to 0.7pc, suggesting that there is "very little anecdotal evidence at present to suggest Brexit weighed on GDP, data from the ONS showed this morning. 

    Here are the key points: 

    • UK GDP in volume terms was estimated to have increased by 0.7pc in Quarter 2 2016, revised up 0.1 percentage points from the second estimate of GDP published on 26 August 2016. This is the 14th consecutive quarter of positive growth since Quarter 1 (Jan to Mar) 2013.
    • Revisions to GDP quarterly volume growths are small compared with the previously published estimate – with a 0.1 percentage point upward revision to Quarter 2 2015 and a 0.1 percentage point downward revision to Quarter 3 (July to Sept) 2015 and no revisions to Quarter 1 2015, Quarter 4 (Oct to Dec) 2015 and Quarter 1 2016.
    • Between 2014 and 2015, GDP in volume terms increased by 2.2pc, unrevised from the previous estimate. 
    • GDP per head in volume terms was estimated to have increased by 0.5pc between Quarter 1 2016 and Quarter 2 2016. Between 2014 and 2015, GDP per head increased by 1.4pc.
    • GDP in current prices increased by 1.5pc between Quarter 1 2016 and Quarter 2 2016, revised down 0.1 percentage points from the previously published estimate.
    • The households and non-profit institutions serving households saving ratio was estimated to be 5.1% in Quarter 2 2016 compared with 5.6pc in Quarter 1 2016. In 2015, the saving ratio was estimated to be 6.1pc.
    • Real households disposable income increased by 0.6pc in Quarter 2 2016. In 2015 real households disposable income increased by 3.pc.

    Any decision to raise capital 'not going to be triggered' by US DoJ settlement, says JP Morgan

    Reuters  has gathered some reactions to the latest Deutsche Bank share price plunge from investment banks in the City: 

    1. Kepler Cheuvreux: In a note titled "Keep Calm, etc.", Kepler's head of banks research sticks with a "buy" rating, adding DB bank has raised two-thirds of its long-term funding for the year and that if worse comes to worst the TLTRO II offers an unlimited funding window to offset pressing maturities. Analyst adds: "We are going to see now how good the new Basel III standards really are and in particular to what extent they make a difference."
    2. Goldman Sachs: DB's liquidity position (as of Q2 2016) is stable and further strengthened by ECB funding backstop. However, reaction to single piece of news (on hedge fund clients) demonstrates the extent of concern in the market. "As market concerns intensify, achieving resolution to litigation, and thus capital concerns, is important," Goldman says. 
    3. JP Morgan: "Inability to generate organic capital is the root of DB’s problems" along with an inability to cut net costs. JPM adds that Deutsche has plenty of liquidity reserves (€223bn) and a well-funded and matched balance sheet. The key issue, however, its low B4CET1 ratio of 11.2% by YE2018. Any decision to raise capital "is not going to be triggered by the actual US RMBS settlement, but if there is a loss of client revenues," JPM says. 

    Meanwhile, Deutsche Bank's morning note by strategists did its best to skirt the issue. 

    Deutsche Bank's Cryan reassures staff over market concerns

    John Cryan, the chief executive of under pressure Deutsche Bank, has moved to reassure staff amid fresh concerns over the bank's stability. 

    In a letter to employees, Mr Cryan said he understood that employees could be unsettled by extensive speculation in the media that a few hedge fund customers had left the group. However, he attempted to reassure staff by saying the bank was solid and had more than 20m customers. 

    In the internal memo, he said: 

    "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." 

    Since it was confirmed the US DoJ asked the German lender for $14bn to settle a claim over its sale of mortgage backed securities, shares have come under increasing pressure. 

    Mr Cryan said that given the lower settlements of similar cases which have eventually been agreed by its competitors, he said uncertainty over the outcome of the fine was no reason for the share price to be under pressure. 

    He also added that the bank "has a strong foundation". (Quotes from Reuters)

    Here's how Twitter has reacted to the latest comments from the chief executive: 

    Deutsche Bank CDS jump 21bp amid concerns over stability

    The cost of insuring Deutsche Bank's debt against default jumped by 21 basis points this morning amid reports hedge funds were trimming their exposure to the German lender, rattling investors' confidence in the bank and sending shares to a fresh all time low. 

    Data from Markit showed, credit default swaps on Deutsche Bank's five-year senior debt rose to 255 basis points from Thursday's close of 234 basis points, yet still shy of the seven-month high of 260 bps hit on Tuesday.

    However, Sascha Steffen, of the Centre for European Economic Research, ZEW, said the CDS prices do not reflect that bank is on the brink of collapse. 

    German government 'totally incapable' of understanding Deutsche Bank crisis

    After yesterday's rumours that ten of large hedge funds were considering or had withdrawn from Deutsche Bank, David Buik, of Panmure Gordon, highlighted: 

    "What must be understood here is that Deutsche Bank is the main clearing house for trades in Europe. The problem the hedge funds have is where do they move for clearing? Short-term, they can move to New York or London. With over $60 trillion derivative book at the Deutsche Bank, the government is totally incapable of even understanding how to deal with this crisis.

    "Until such time as Messrs Merkel, Schauble and Weidmann step up to the plate with an unambiguous explanation, which is wholly transparent, this issue is not going away. It is ludicrous for Merkel’s mob to think that fund managers will pick up the tab for a massive rights issue without the necessary reassurance and inevitable support.  So this morning expect European markets to express their displeasure and one suspects that other financial stocks will take a beating. As I and hundreds of other commentators have been saying for over two years, European banks, in many cases, are hopelessly undercapitalised. This MUST be dealt with."

    Shares in Deutsche Bank plummet 28pc in three weeks

    Jamie McGeever, of Reuters, flags that Deutsche Bank's shares have plummeted 28pc in just three weeks. 

    Issue now is what Deutsche's woes mean 'politically for the eurozone' 

    After yesterday's report that some hedge funds were seeking to remove some of their business and exposure from Deutsche Bank, Jeremy Cook, of World First, said we'll have to "wait and see" what the German government does now. 

    "The issue now is what this means politically for the eurozone," he added. 

    " Bank bailouts were not popular in 2008 and will be even more unpopular now in an environment of anti-elite, populist politics."

    When Italy gives Germany advice about Deutsche Bank.... 

    Oh how times have changed! Italy's economy minister has urged for a quick answer to the problems of German lender Deutsche Bank. In a newspaper interview today, Pier Carlo Padoan said it was in everyone's interest "to look for solutions that must then be carefully handled". 

     "Just like the problem of bad bank loans must be solved within a reasonable time frame, so it should be for Deutsche Bank's problems," he told Italian daily La Stampa.

    Deutsche Bank's fine will be lower than $14bn, says Goldman Sachs

    Goldman Sachs has tried to allay investors fears this morning by saying that the size of Deutsche Bank's fine to the US DoJ will be well below the $14bn requested - it estimates it will be somewhere between $2.1 and $8.1bn. 

    European banking sector rattled by Deutsche Bank woes

    Concerns about Deutsche Bank's health has rattled the banking sector this morning, all sector constituents on the Stoxx banks index are in the red - with the index itself down 3pc, the worst performing sector across Europe. 

    Barclays is the biggest loser on the FTSE 100, down 3.5pc, with RBS also off by 3pc. 

     Connor Campbell, of SpreadExsaid: "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 5pc declines seen by Barclays and RBS (the latter of which is perhaps most in line for a Deutsche Bank style shock). 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."

    Deutsche Bank admits 'perception issue' as shares slide

    Deutsche Bank has admitted it had an image problem with investors as fears over the beleaguered bank's health reemerge today, rattling global financial markets. 

    The catalyst for the latest share price plunge was a report from Bloomberg  last night after it said a number of hedge funds that clear  derivatives trades with Deutsche had withdrawn some excess cash and adjusted positions, a sign that counterparties are wary of doing business with it.

    One large hedge fund in Asia had pulled out its collateral from Deutsche amounting to $50 million in the last two days, while another fund which had a "smallish amount" with the bank was monitoring the situation closely and had not pulled out yet, people familiar with the matter told Reuters on Friday.

    Another person with knowledge of the development said it was common to see fluctuations in balances among hedge fund clients, and these actions represented a small portion of the bank's more than 800 clients in the hedge fund business.

    In a statement on Friday, Deutsche reiterated its trading clients remained largely supportive.

    "We are confident the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the U.S. and the progress we are making with our strategy," it said.

    A separate Asian hedge fund source said "sophisticated investors" would have already pulled out excess cash or unwound positions held at Deutsche, and, therefore, there would not be a huge wave of these withdrawals.

    "We haven't heard any talk that someone stopped trading with that bank in the interbank market. It's just some hedge funds (that have stopped trading with Deutsche)," a trader at a Japanese bank said.

    "Basically we do have collaterals for most trades and they are reviewed daily. So the situation is a bit different from before the Lehman crisis. Also, the amount of the fine is not set yet."

    Barry Bausano, chairman of Deutsche's hedge fund business, told CNBC that its prime brokerage division, which services hedge funds, was "still very profitable" but said there was "no question we have a perception issue."

    Fabrizio Camelli, head of the Deutsche wealth management business, said the bank was seeking to reassure customers and had not seen "any noticeable outflow of client funds."

    "Of course some of our customers are asking what is up with Deutsche Bank at the moment. We are telling them that we are doing better than it might seem from outside," he told Germany's Sueddeutsche Zeitung daily.

    The immediate cause of Deutsche's crisis is a fine, disputed by Deutsche, of up to $14 billion by the U.S. Department of Justice over its sale of mortgage-backed securities. 

    Profits at Germany's lenders have been squeezed by the European Central Bank's money-printing policy. They have been seeking to boost revenue by passing on costs to corporate customers and increasing fees for retail depositors.

    Deutsche's shares were seen down 6.2 percent in Frankfurt before market open on Friday, after the bank's U.S.-listed shares  fell more than 9 percent in New York on Thursday after touching a record low in Europe this week.

    Report from Reuters

    European bourses plunge to eight-week low as Deutsche woes return

    Concerns about the health of the beleaguered Deutsche Bank have caused shares to tank to an eight-week low this morning. 

    Here's a look at the state of play almost an hour into trading: 

    • FTSE 100: -1.23pc
    • DAX: -1.79pc
    • CAC 40: -2.10pc
    • IBEX: -2.34pc

     Mike van Dulken, of Accendo Markets, said: "A negative start is the result of an intensification of worries about Deutsche Bank and whether major hedge fund clients are shying awayfrom exposure to the German institution. Its US-listed shares closed almost 7% lower last night. This only adds to already dampened risk appetite as investors came to realise what an OPEC ‘deal’ actually means." 

    Hedge funds trim exposure to Deutsche Bank

    Here's an extract from that Bloomberg report that reveals hedge funds are trimming their exposure to Deutsche Bank - it appears this report is the catalyst for the latest share price slide: 

    The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person familiar with the situation who declined to be identified talking about confidential client matters.

    "In any given week, we experience ebbs and inflows,” said Barry Bausano, the bank’s chairman of hedge funds. “And this week is no different; it goes on all the time." He declined to comment on net flows.

    Deutsche Bank's shares plunge below €10 for first time ever

    Deutsche Bank shares plunged almost 9pc this morning crashing below €10  for the first time ever after Bloomberg last night reported that hedge funds are trimming their exposure to the German lender. 

     Here's a look at the stock price this morning: 

    Credit: Bloomberg

    Why are German banks causing such worry?

    Marion Dakers explains why German banks have become the latest headache for financial markets: 

    After several years of fretting about Spanish, Italian and French banks as the eurozone economy staggered onwards, the financial markets became nervous about the health of the German powerhouse Deutsche Bank and its smaller competitors at the start of this year.

    Deutsche posted its first full-year loss since 2008 in January due to a variety of problems including a €5.2bn provision for fines and lawsuits, sending its shares careering lower and pushing its new bonds into a tailspin.

    The crash in its €4.6bn tranche of contingent-convertible bonds, known as cocos, was particularly alarming because they are designed to wipe out investors in a crisis, therefore avoiding a state bailout – but so far no bank has put this safety valve to the test. 

    Deutsche Bank has not even come close to converting its bonds yet, but the firm has come back into sharp focus because of a $14bn fine proposed by the US Department of Justice last week for mis-selling mortgage-backed securities in the heady days before the financial crisis.

    Shares in Deutsche have lost more than half their value so far this year. The IMF hasn't helped matters, saying in June that the bank is the greatest contributor to systemic risk in the world's biggest lenders. 

    Commerzbank is also preying on investors’ minds, after reporting another round of job cuts that will see one in five positions axed.

    ​Continue reading here

    Deutsche Bank under pressure as hedge funds cut exposure

    Last night it was revealed that hedge funds are cutting their exposure to Deutsche Bank prompting further angst among investors. Ben Martin reports: 

    Deutsche Bank came under mounting pressure this evening after it emerged that some hedge funds worried about its financial health had started to trim their exposure to the troubled lender, sparking fresh fears about its future.  

    About 10 funds that use Deutsche’s prime brokerage business – a division that services hedge funds - are believed to have reduced their positions with the bank in recent days by shifting some of their derivatives holdings to different firms and withdrawing some cash.

    Although they represent a small proportion of the funds and firms that do business with Deutsche, the move, which was first reported by Bloomberg News, indicates the growing nervousness among investors about trading with the bank.  If more clients follow suit, it threatens to exert even greater pressure on the German lender, which is Europe’s biggest bank.

    News of the hedge funds’ move sent Deutsche’s New York-listed shares plunging as much as 9.1pc and sparked a broader sell-off on Wall Street, with the Dow Jones Industrial Average sliding as much as 1.4pc at one point.

    Continue reading here

    Agenda: Deutsche's woes worsen, as shares fall below €10

    Good morning and welcome to our live markets coverage. 

    Today, Deutsche Bank returns to centre stage as concerns  over its stability rattled European markets, prompting another sharp sell off. 

    Last night, the German lender came under increased pressure when it emerged that hedge funds worried about its health had started to reduce their exposure to the bank. 

    We'll have the latest in the Deutsche saga throughout the day... 

    Also on the agenda today: 

    Full-year results: The Brighton Pier Group

    Interim results: Loopup Group, Origo Partners

    Trading update: Trinity Mirror

    AGM: World Trade Systems, City of London Group, Entertainment One

    Economics: mortgage approvals (UK), M4 money supply m/m (UK), net lending to individuals m/m (UK), retail sales m/m (GER), CPI flash estimate y/y (EU), core cpi flash estimate y/y (EU), unemployment rate (EU), revised UoM consumer sentiment (US), revised UoM inflation expectations (US), Chicago PMI (US), personal income m/m (US), core PCE price index m/m (US), personal spending m/m (US)

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