Doha: Deutsche Bank has secured support from its largest shareholder and more German legislators as it grapples with a confidence crisis following US authorities’ demands for up to $14 billion to settle allegations it mis-sold mortgage-backed securities.
Qatari investors who own the largest stake in Deutsche Bank do not plan to sell their shares and could consider buying more if the German bank decides to raise capital, sources familiar with Qatari investment policy said.
“Purchasing more (Deutsche Bank) stock – that could be considered ... which is not to say there are any imminent plans to do that,” said a source close to the Qatari investors who own just below 10 per cent in Deutsche Bank.
If a capital increase does turn out to be required, the Qatari investors would probably take part in it as they want to keep their roughly 10pc stake, a second source said.
Deutsche shares plunged to record intra-day lows below 10 euros last week and although they have since rebounded to just above 12 euros, they are 13pc below last month’s peak and 46pc below their close at the end of last year. That implies the Qataris may have lost, on paper, more than $1.2bn on their investments in the bank.
Deutsche Bank head John Cryan, who is attending the International Monetary Fund and World Bank’s meetings in Washington, is due to meet with the Department of Justice (DoJ) as well as with senior managers of other investment banks in the US to discuss the lender’s options.
However, the talks with other bankers are expected to focus on immediate steps the German bank may be able to take such as asset sales, rather than asking shareholders for fresh cash.
“The capital increase will unlikely be the focus of most of those meetings,” one of the sources said, adding that pulling off a capital-raising deal would be a well-rehearsed exercise which does not need too much advance discussion.
German economy minister Sigmar Gabriel yesterday said that while Deutsche Bank faced enormous challenges with potential fines in the US, moves by its leadership to change the bank’s business model showed it was reacting to the risks it faced.
Gabriel said the government did not have its own risk assessment for the bank but that Germany was keen to see the bank succeed in the longer term.
Deutsche Bank’s proposed fine has emerged as another bone of contention between the US and the European Union after the EU said earlier this year that US tech giant Apple owed $14bn in taxes. The chairman of euro zone finance ministers, Jeroen Dijsselbloem, said yesterday that the size of the fine was disproportionate and could place Europe’s financial system at risk.
Deutsche says it expects to settle with the DoJ for far less than $14bn, in line with other big banks that negotiated smaller fines over similar allegations.
Launching a capital increase before a settlement with US authorities is deemed impossible as few investors will be willing to buy shares without being able to gauge the impact on the lender’s capital, equity capital market bankers said.