Deutsche lifted by CEO letter, settlement report

Fri Sep 30, 2016 12:33pm EDT
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By Andreas Kröner and Maiya Keidan

FRANKFURT/LONDON (Reuters) - A report that Deutsche Bank (DBKGn.DE: Quote) was close to a cut-price settlement with U.S. authorities over the sale of toxic mortgage bonds helped to fuel a recovery in its shares on Friday after its chief executive said the group remained stable.

Deutsche, which is Germany's largest bank and employs around 100,000 people, has been engulfed by crisis after being handed the demand for up to $14 billion earlier in September by the Department of Justice (DOJ) for misselling mortgage-backed securities before the financial crisis.

Deutsche shares, which hit a record low earlier on Friday, extended their recovery after the AFP news agency said the bank was near to a settlement for $5.4 billion. Deutsche and the German finance ministry declined to comment on the report.

The bank is fighting the fine but would have to turn to investors for more money if it is imposed in full. The German government this week denied a newspaper report that it was working on a rescue plan for the bank.

Worries over a major bank in Europe's largest economy and talk of a government rescue have stirred painful memories of the 2007-2009 financial crisis and sent tremors through global markets.

Chief Executive John Cryan had tried to rally staff with a letter addressing reports of the departure of a few hedge fund clients, hitting out at "forces" that wanted to weaken trust in the bank.

People familiar with the matter had earlier told Reuters that one large hedge fund in Asia had pulled out collateral from Deutsche amounting to $50 million in the last two days, while other sources said this had happened elsewhere, albeit on a small scale.

Cryan sought to put the moves into perspective.   Continued...

A statue is seen next to the logo of Germany's Deutsche Bank in Frankfurt, Germany, January 26, 2016.    REUTERS/Kai Pfaffenbach/File Photo