Deutsche Bank soothes markets with bond buy-back | Business| Economy and finance news from a German perspective | DW | 12.02.2016
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Deutsche Bank soothes markets with bond buy-back

Germany's biggest lender has announced plans to repurchase a major chunk of its debt in an effort to boost investor confidence, after rumors about the bank's health sent its shares on a roller-coaster ride this week.

As part of its efforts to allay fears over the depth of its pocket, Deutsche Bank said Friday it would buy back up to 4.8 billion euros ($5.4 billion) of its own outstanding bonds, adding that its liquidity position is comfortable enough to carry out the repurchase.

The offer for bonds denominated in euros is worth up to 3 billion euros, while that for debt denominated in US dollars totals up to $2 billion.

The announcement sent the bank's shares shooting up more than 11 percent to 15.3 euros on Friday, outperforming the overall Frankfurt DAX index, which was up 2.39 percent.

Deutsche Bank's finance chief Marcus Schenk said in a statement that the group was "taking advantage of market conditions" that would enable it to lower its debt "at attractive prices."

"By repurchasing this debt below its issue price, the bank realizes a profit," he added.

The Frankfurt-based bank's announcement comes at the end of a turbulent week for the lender, after Deutsche Bank emerged at the center of investors' concerns about the state of the European financial sector, sending shares plummeting.

On Tuesday, February 9, Deutsche's CEO John Cryan took the unusual step of issuing a public statement and writing to the group's employees to say that the bank "remains absolutely rock-solid, given our strong capital and risk position." He also said that it has sufficient cash to pay its riskiest debts.

Separately, German Finance Minister Wolfgang Schäuble also brushed aside concerns over the bank's health, saying the bank had "sufficient capital" as authorities had taken precautions to make banks resilient in the wake of the 2008/2009 financial crisis. "Deutsche Bank is a strong bank and that's it," he added Friday.

Banking rout

The entire European banking sector had lost about a fifth of their market capitalization in January, dragged down by weakness in the eurozone economy and challenges facing banks from ultra-low interest rates and regulatory pressures.

But Deutsche Bank has taken a bigger battering because it is also entangled in a web of legal woes. Its share price has plunged by a third since the beginning of the year.

The bank faces a quagmire of as many as 6,000 different litigation cases, the provisions for which helped push it to a record loss of 6.8 billion euros last year.

Last May, it was fined a record $2.5 billion for its involvement in rigging interest rates, and has faced probes by Swiss authorities for suspected price fixing on the precious metals market. US investigators have also looked into its Moscow branch on suspicion of possible involvement in money-laundering.

uhe/sri (AFP, Reuters, dpa)