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Currency analyst

Deutsche Bank may drown European markets

Deutsche Bank shares lost more than 7.5% to €10.55 on Monday reaching their lowest level since 1983.

The bank’s senior executives hurried to reassure investors it has enough money to cover a multibillion-dollar fine for alleged mis-selling of the bonds in the period before the 2008 crisis. Never the less, Deutsche Bank will unlikely cope with mounting financial problems without government support. Since the beginning of this year the bank's shares fell by more than 50%. Its bonds have dropped as well. Deutsche Bank risks facing a shortage of capital.

From early 2016 Deutsche Bank was struggling to cuts costs and restore profitability, but as legal challenges have mounted and the fine has appeared on the table, investors’ sentiment has knocked out. Before the decade of crisis (the global financial crisis, the European sovereign debt crisis), Deutsche could have written out this ill-fated cheque with a nonchalant smug and not to lose the trust of its clients, but now nobody is sure where it can get the money from.

If the German Government doesn’t meddle in with its rescue, a huge banking crisis will burst out. That, in turn, will cripple the European largest economy, blow the Italian banking system, and French and Spanish banks will be next. Add to this the impact of Brexit, and you will get a full house. With this scenario, it is not surprising that the markets are facing the tremendous decline in the DB’s share price.

 

EUR
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