DB Stock Plunges 7% after News
Losses in Deutsche Bank AG (NYSE:DB) stock are deepening as some hedge funds are losing faith in Germany’s largest lender.
DB stocks plunged a further seven percent during New York trading, amid concerns that the bank won’t be able to absorb a $14.0-billion fine that the U.S. Department of Justice is seeking for the bank’s role in the subprime debt crisis of 2008.
Deutsche Bank —which has been struggling to satisfy investors for the past couple of weeks since the news of legal penalties broke—has come under further scrutiny about 10 hedge funds that do business with the German lender are moving to cut their financial exposure. The funds, which use the bank’s prime brokerage service, have moved part of their listed derivatives holdings to other firms this week. (Source: “Cryan Defends Deutsche Bank as Some Clients Pare Back Exposure,” Bloomberg, September 29, 2016.)
Those hedge funds include: Izzy Englander’s $34.0-billion Millennium Partners, Chris Rokos’s $4.0-billion Rokos Capital Management LLP, and the $14.0-billion Capula Investment Management LLP. Deutsche Bank has 200 such clients. (Source: Ibid.)
In a reply to the U.S. Department of Justice’s $14.0-billion claim, Deutsche Bank said it expects to renegotiate a lower settlement with the U.S. government. “Our trading clients are amongst the world’s most sophisticated investors,” said Michael Golden, a spokesperson for Deutsche Bank. “We are confident that the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the U.S. and the progress we are making with our strategy.” (Source: Ibid.)
DB stock has lost more than half of its value in the past year on concerns that the bank’s financial position is deteriorating amid slow economic growth in Europe and the financial implications of its legal battles in the U.S. and Russia.
Russian authorities may force Deutsche Bank to pay up to $4.0 billion, a number that could easily eat into its tier-one capital. (Source: “How Deutsche Bank Will Be Hurt by Mortgage Fines,” The Wall Street Journal, September 16, 2016.)