Fresh rumours emerge about bailout-ability of Deutsche Bank

Hayley Kirton
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The German press has been quick to point out why government help might not be on the cards (Source: Getty)

Fresh speculation over whether the German government could feasibly offer aid to Deutsche Bank has emerged in the country's media over the weekend.

The bank's shares plummeted last week after reports emerged suggesting German Chancellor Angela Merkel would not be prepared to provide state assistence, even as the lender faced a potential fine of $14bn (£10.8bn) from the US Department of Justice (DoJ) for mis-selling mortgage-backed securities.

Now, a variety of German publications have printed concerns that government could not politically prop up the bank even if it wanted to.

The Frankfurter Allgemeine highlighted that, if Merkel were to offer state assistance to Deutsche Bank, it would not sit comfortably with the hard line stance she took against a not dissimilar rescue package proposed for Italy's ailing lenders over the summer.

Read more: Deutsche Bank shares leap in New York as settlement rumours swirl

Meanwhile, Sueddeutsche Zeitung proposed bailing out the bank could turn out to be a vote loser in the country's upcoming elections, as such a move would be unlikely to sit well with taxpayers.

The constant chatter about capital has done little to bolster Deutsche Bank's share price, as it dropped to record lows last week, dipping below the symbolic €10 mark during trading on Friday.

However, share price recovered to close up 6.4 per cent up at €11.57 after reports suggested the bank was fast closing in on a $5.4bn settlement for its DoJ fine and investors will get something of a welcome break tomorrow, as the Frankfurt markets close for German Unity Day.

Read more: "Forces want to weaken us": Deutsche shares edge up as Cryan comforts staff

The company's share price has more than halved over the last 12 months, potentially creating problems for some of its most loyal investors. The Sunday Telegraph reported that Qatari funds' Paramount Services Holdings and Supreme Universal Holdings, which have held a six per cent combined stake between them since 2014, have seen €1bn wiped off the value of their investment.

The combined Qatari funds make it Deutsche Bank's biggest shareholder, ahead of Blackrock, which has a 5.76 per cent holding as of August.

Read more: The new sick man of Europe is the continent’s entire banking sector

Deutsche Bank declined to comment further on issues regarding its capital or its share price. However, when the initial reports that the bank was looking at options for more capital emerged last week, a spokesperson said: "The question of a capital increase is currently not on the agenda, we comply with all capital requirements".

Deutsche Bank: What you need to know

  1. Timeline: Deutsche's annus horribilis
  2. Why is it in such a state? All the reasons Deutsche is in crisis
  3. There's a new "sick man of Europe": This time the patient is Europe's banking sector

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