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Deutsche Bank’s Share Price below €10: Investors Racing to the Exits

Sept. 30, 2016 (EIRNS)—Deutsche Bank’s share price collapsed by 9% this morning after bringing down the Asian markets. Something of a milestone is the fact that the share price is now below the level it was at when Alfred Herrhausen was the head of the bank. By the end of the morning they managed to creep above €10, at €10.42, wiping out the 39 cents gain it made on Wednesday.

Also today Commerzbank unveiled plans to cut nearly 10,000 jobs, one-fifth of its workforce and suspended its dividend for the first time. They said it expected restructuring costs of €1.1 billion.

The German government owns 15% of the bank as a result of its €18 billion bailout in the financial crisis. The price collapsed by 2.8% and JP Morgan by 1.6%.

Other banks’ stocks fell as well, including Royal Bank of Scotland and Barclays. While Goldman Sachs shares fell 3.1% to €5.80. Santander’s shares also fell after the bank launched a profit warning today, lowering to 11% from 13% the Return on Tangible Equity (ROTE) for 2018.

The Financial Times is reporting that the U.S. Justice Department is planning a multibillion-dollar "omnibus settlement" with Barclays, Credit Suisse and Deutsche Bank for mis-selling mortgage-backed securities, in the next few weeks. This is said to assure that it happens before the election.

Of course the elephant in the room, DB’s derivatives portfolio, is starting to rattle the entire banking system. Bloomberg reported that 10 hedge funds pulled out of DB prompting DB’s hedge fund business manager Barry Bausano to tell CNBC that Deutsche, its prime brokerage division, which services hedge funds, was "still very profitable" but said there was "no question we have a perception issue." Then the bank issued a statement saying,

"Our trading clients are among the world’s most sophisticated investors. 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."

As could be expected Bloomberg said the hedge fund withdrawals were a sign of counterparties’ "mounting concerns about doing business with DB." While 10 have withdrawn, the "vast majority" of the 200 clients that clear their derivatives through Deutsche had made no changes.

The funds that withdrew billions from DB include, AQR Capital Management LLC; Capula Investment Management LLP; Citadel LLC; Luxor Capital Group LP; Magnetar Capital LLC; and Millennium Management LLC. These are all considered big hitters.

Bloomberg News reported earlier Sept. 29 that some Deutsche Bank clients have moved derivatives holdings to other firms this week, citing an internal bank document.

Fund managers are being rattled by memories of 2008 when big hedge funds pulled accounts from prime brokers at firms like Bear Stearns, helping precipitate their decline. "That is at the back of everyone’s minds," said one hedge fund manager whose firm has dialed back its exposure to Deutsche Bank recently.

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