Mon, Jul 11, 2016 - Page 14 News List

Deutsche Bank’s lows fuel concerns


Deutsche Bank once epitomized the best of Germany’s financial sector, shining brightly as the European economic powerhouse’s biggest lender.

However, last week its share price slid to new lows, fueling concerns about the health of the institution, with some even questioning if it has a long-term future and the IMF moved to see it as a “systemic” risk to global finance.

The price of Deutsche Bank shares slumped to an all-time closing low of 11.44 euros on Thursday. That means they have lost a staggering 49 percent in value since the beginning of the year and are the worst-performing stock in the blue-chip DAX 30 index.

Over a 10-year period, the drop is even more alarming: in May 2007, before the sub-prime crisis erupted, Deutsche Bank shares had hit the giddy heights of more than 100 euros.

Contacted by reporters, the bank did not want to comment on the development, which has repeatedly fueled speculation that Deutsche Bank could seek to raise fresh capital.

Like most of its European rivals, “Deutsche” as it is simply known, has been battered in recent weeks by uncertainty related to the British vote to quit the EU. In addition, the chronic weakness of the Italian banking sector is feeding investor concerns about the solidity of other European institutions. Such factors are hitting the sector as a whole.

However, in combination with what are perceived to be Deutsche Bank’s own in-built weaknesses, the bank was recently described by the IMF as “a major source of systemic risk in the global financial system.”

Deutsche Bank, which has total assets of more than 1.6 trillion euros (US$1.8 trillion) and a workforce of 100,000, “appears to be the most important net contributor to systemic risks in the global banking system, followed by HSBC and Credit Suisse,” the IMF wrote last month in a study.

The US Federal Reserve last week said Deutsche’s US arm failed two sets of stress tests in a row.

“Deutsche Bank’s decline has been spectacular,” a source at a major European bank said.

Certainly, long gone are the days when Deutsche Bank was seen as Germany’s financial pride and joy.

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