Wednesday 22 November 2017

Deutsche Bank's woes halt German bond deal

Angela Merkel
Angela Merkel

Michael Nienaber, Katie Linsell and Tom Beardsworth

German Chancellor Angela Merkel expressed hope yesterday that problems at Deutsche Bank could be solved after the lender made clear it needed no state aid with a $14bn (€12.4bn) demand to settle claims it missold mortgage-backed securities.

Asked during a news conference if Berlin was concerned about Deutsche Bank and was considering assistance, Ms Merkel, inset, said: "I only want to say that Deutsche Bank is a part of the German banking and financial sector.

"And of course we hope that all companies, also if they face temporary problems, can develop in the right direction. I don't want to comment beyond that."

Deutsche Bank said on Monday it had no need for German government help.

On the markets, investor concerns saw the cost of insuring Deutsche Bank's riskier subordinated debt rise to a record.

Credit-default swaps on the German lender's junior bonds jumped as much as 37 basis points to 536 basis points, the highest level since prices began being tracked in 2007.

Credit default swaps insure bondholders against losses in the event of a bank default.

Deutsche Bank's €1.75bn of so-called additional Tier 1 bonds, which pay interest of 6pc, are first in line to take losses in a crisis. They fell about 2 cents on the euro to a more than seven-month low of 71 cents, according to data compiled by Bloomberg.

Deutsche Bank is coming under pressure as the US Department of Justice (DoJ) fine hinders chief executive John Cryan's push to shore up profitability and capital.

"Deutsche Bank is hanging over markets and it's not going to go away," Simon Adamson, an analyst at CreditSights, said at a conference in London. "The big question point is the DoJ investigation." Don Hunter, a London-based spokesman at Deutsche Bank, didn't immediately comment on its credit-default swaps.

Concerns about Deutsche Bank are hitting the wider debt market. Germany's largest shipping lender, Norddeutsche Landesbank, abandoned plans to issue euro-denominated bonds yesterday, citing market conditions. Germany's flagship airline Lufthansa withdrew a euro-bond deal on Monday after failing to get the desired price.

"The sell-off is gathering its own momentum," said Suvi Platerink, a senior credit analyst at ING Bank. "It's a reflection of limited market liquidity and a very small number of buyers around." (Reuters/Bloomberg)

Irish Independent

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