Deutsche Bank (ETR:DBK) saw shares rise over 6 percent on Monday, as prominent German business leaders announced their support for the troubled bank.
Deutsche Bank shares fell to their lowest level in 30 years last week on speculation that the bank would need to be bailed out if it was forced to pay the US government’s $14 billion fine. The fine was given in mid-September as a result of Deutsche Bank’s part in causing the 2008 financial crisis.
However, investor sentiment turned more positive today after several key businessmen spoke out in favour of the German bank.
BASF chairman Juergen Hambrecht told the Frankfurter Allgemeine Sonntagszeitung that his company will “stand with Deutsche Bank”, with Reinsurance giant Munich Re’s chief executive, Nikolaus von Bomhard, saying there was no need to “reduce our business volume” with Deutsche Bank.
Daimler’s CEO Dieter Zetsche also reiterated his support: “Deutsche Bank has a great tradition, a solid foundation and beyond that, a good future ahead. Of that I am convinced.”
Despite Deutsche’s relatively small size it has a significant influence globally through its trading relationships with some of the world’s biggest banks. In June, the IMF identified it as one of the biggest risks to the financial system.
However, Siemens boss Joe Kaeser joined the chorus of voices supporting the bank, saying that the bank’s management “is pursuing the right goals and has our fullest confidence”.
Deutsche Bank vowed to contest the fine, one of the largest to be handed out to a bank by the US Department of Justice since the financial crash, saying the $14 billion was just a starting point for negotiations. Ratings agency Moody’s have said $3.1 billion would be a positive figure for bondholders, with a fine as high as $5.7 billion denting profitability but not causing long term damage.
The bank has several options to raise funds to pay the fine. Selling assets, an option the bank has already turned to with the sale of its stake in a Chinese bank that is set to raise $4 billion, and raising more capital from its own shareholders or a sovereign wealth fund.
An unconfirmed media report released on Friday suggested that Deutsche and the US Department of Justice were close to agreeing on a settlement of $5.4 billion.