In an unusual move, Deutsche Bank has published online a letter to employees, which the company’s CEO sent to employees in the aftermath of the turmoil this morning. The content aggressively rebukes the reports that the bank’s clients are leaving it with Bloomberg reporting last night that about ten hedge funds have reduced their liquidity exposure to Deutsche.
John Cryan is stating that the concerns that stemmed from the report are “unjustified” and that when taking into account that the German lender has over 20 million clients, the significance of the move undertaken is not material.
Elaborating on the bank’s fundamentals, the CEO of Deutsche Bank states that the company is adhering to all its capital requirements and its recent steps of restructuring its business are yielding results. The company has recently sold its British insurer arm called Abbey Life and its stake in Chinese Hua Xia Bank.
Highlighting in his letter that the company’s liquidity reserves are in a solid state, Cryan stated: “Currently our liquidity reserves 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.”
The company’s shares have rebounded in the aftermath of the announcement and are currently trading over 8 per cent higher than the all time low at €9.9 per share.
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?
What Does 2021 Hold for the Markets? HYCM CEO SpeaksGo to article >>
— James Mackintosh (@jmackin2) September 30, 2016
“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. 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.”
With the uncertainty over Deutsche Bank’s litigation costs in the U.S. remaining on the table, the capital markets are still looking at hard data in order to assess what are the risks surrounding the bank. For the time being the immediate pressure on Deutsche Bank has subsided materially when compared to last night and earlier this morning.
Deutsche Bank sub cds blowing out this morning. A close at today’s level would be widest weekly close on record, worse than Lehman & PIIGS. pic.twitter.com/oOQJMbRPnb
— J Pierpont Morgan (@pierpont_morgan) September 30, 2016