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Deutsche Bank shares sink to lowest level for more than 20 years

Published 26/09/2016

The speculation has sharpened the focus on the financial health of Deutsche Bank
The speculation has sharpened the focus on the financial health of Deutsche Bank

Shares in Deutsche Bank have plunged to their lowest level for more than 20 years despite the lender dismissing speculation that it had asked the German government to wade into its stand-off with US authorities over a hefty settlement proposal.

The Frankfurt-based lender saw its market value slide more than 6% on the Dax after a report from Focus magazine citing government sources said Chancellor Angela Merkel would not intervene in the negotiations or provide any state aid to the bank.

The US Department of Justice (DoJ) has tabled a 14 billion US dollar (£10.5 billion) settlement deal following a probe into the German lender's sale of mortgage-backed securities during the financial crisis.

The bank said previously that it has no intent to settle the potential civil claims at "anywhere near the number cited".

In a statement, Deutsche Bank quashed speculation it had approached Mrs Merkel for help, saying it was "determined to meet the challenges on its own".

It said "at no point" had co-chief executive John Cryan asked Mrs Merkel to intervene in its negotiations with the DoJ.

"The question of a capital increase is currently not on the agenda, we comply with all capital requirements," it added.

The speculation has sharpened the focus on the financial health of Deutsche Bank, which has seen its share price drop by more than 60% since last October.

Michael Hewson, chief market analyst at CMC Markets UK, said there was growing investor disquiet about Deutsche Bank's ability to grapple with challenging market conditions for banks, which includes negative rates, shrinking profitability and the prospect of tighter capital rules.

"While one can understand the reticence of German politicians to bail out yet another bank, particularly in the lead-up to an election next year, one has to question the wisdom of articulating that reluctance out loud when markets are already nervous about Deutsche Bank's capital position," he added.

Investor concern over the German lender sparked a sell-off of European banking stocks on Monday, with Royal Bank of Scotland (RBS) and Barclays down 3% and 2% respectively.

Shares in Deutsche Bank closed down 7.5% to 10.55 euro (£9.16).

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