New York-listed shares in Deutsche Bank have jumped on reports the giant bank could be about to agree a $5.4bn (£4.2bn) settlement with US regulators after a dramatic day of trading on European markets.
Shares jumped 14 per cent in lunchtime trading in the US, as rumours circulated suggesting it will pay significantly less than the $14bn originally mooted by the US Department of Justice (DoJ).
Frankfurt-listed shares, which opened the day down nine per cent, closed 6.4 per cent up on the news to close at €11.57, after sinking below €10 earlier in the session.
Deutsche Bank had been thrown into turmoil after the DoJ announced a $14bn fine over the bank's role in the underwriting of controversial mortgage-backed securities in the run-up to the financial crisis. At points over the past week, the bank's total market capitalisation has dipped dangerously close to the $14bn mark, amid fears of a fresh rights issue and talk of a Lehman Brothers re-run.
This afternoon, AFP reported unnamed sources said the bank was close to reaching a settlement with the DoJ which would see it hand over just $5.4bn, sparking relief among investors and sending the shares surging. The settlement was set to be agreed in the next few days, though neither Deutsche Bank nor the DoJ would comment on the reports.
Deutsche Bank had bounced back from its latest record low share price after a note from chief executive John Cryan blamed "speculators" for the share price swings.
In the memo, sent initially to employees, but eventually made public by Deutsche Bank, Cryan said: "Our bank has become the object of heavy speculation - renewed rumours have sparked marked swings in shares." He reiterated the bank's robust capital position and also highlighted hundreds of billions of euros in liquidity Deutsche could get its hands on, if needed.
It was Deutsche's banking rivals, such as Goldman Sachs and Credit Suisse, who came to their rescue, with research notes insisting the bank's situation is not as bad as the share price suggests, rejecting the idea Europe could be on the brink of a financial crisis, and insisting the $14bn claim being levelled by US regulators against the bank would be watered down.
Key European policymaker Jeroen Dijsselbloem also stepped into the fray this afternoon. The Dutch finance minister, who leads the influential committee of Eurozone finance ministers, ruled out the prospect of state aid, and put pressure on the US authorities to ensure their latest litigation case does not cripple the institution, according to Dutch media reports.
Deutsche Bank: What you need to know