Deutsche Bank’s woes continued today as shares fell by more than 3 percent after Chief Executive John Cryan failed to secure a speedy deal with the U.S. Department of Justice (DoJ) over the misselling of mortgage-backed securities.
Cryan was attending the International Monetary Fund and World Bank’s autumn meetings in Washington, raising some hopes that he might personally negotiate down the $14 billion fine the DoJ has demanded.
However, as reported by Finance Magnates last week when it was revealed that the German lender was contemplating an Asset Management Unit IPO, it was not expected that a deal would be reached at this time.
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Nonetheless, a German trader said: “One had hoped that a quick agreement was possible”.
In early trading today, Deutsche Bank shares had pared losses but were still at the bottom of a flat German blue-chip index .GDAXI, down 3 percent at 11.74 euros.
Terry Torrison, managing director at Monaco-based McLaren Securities, commented: “They had a bit of a bounce up last week, but I would still steer clear of Deutsche Bank. They were never going to sort out the US issues that quickly, and whatever happens, I still think they will need to have a rights issue.”
Deutsche Bank is expected to issue new shares, sell assets or both after learning the scale of the fine to ensure that its capital ratio remains within regulatory limits.
The beleaguered bank has faced an uphill struggle to restore market confidence, which took a further blow when the $14 billion figure was leaked and raised questions as to whether Cryan had a plausible plan to revamp the bank.