Friday 30 September 2016 9:49 am

"Forces in the market want to weaken us": John Cryan seeks to reassure Deutsche Bank staff

Deutsche Bank shares edged back over the €10 mark in mid-morning trading after chief executive sought to reassure staff in a company-wide memo.

In the document, Cryan suggested the bank was strong and hit out at "speculators" for causing wild swings in the company's share price.

"Our bank has become the object of heavy speculation – renewed rumours have sparked marked swings in shares," he wrote. 

"There are forces now under way in the market that want to weaken confidence in us. Our job now is to ensure that this distorted perception does not more strongly influence our day-to-day business," he said (full memo below).

Shares, which had fallen to a record low of €9.92 in early trading, edged back up to €10.27, 5.52 per cent down.

The story so far

Deutsche Bank has had a tough few months, but the straw that broke the camel's bank this time around is a potential $14bn (£10.6bn) fine by the US Department of Justice (DoJ). 

Although the lender said the penalty, which is in connection with its sales of mortgage-backed securities, was nowhere near the amount it will actually end up paying, it has nonetheless caused rumours funds are fleeing from its shares

It didn't help that this weekend, German Chancellor Angela Merkel said her government would not bail out the lender if it ran into trouble – and although she later u-turned on those comments, the German government has since been forced to deny bailout plans

All of this has caused whispers among analysts about Deutsche becoming Europe's answer to Lehman Brothers

On Tuesday CMC Markets' Jasper Lawler said: "There is a fear that Deutsche Bank is setting up as Europe’s Lehman Brothers moment. US banks have been taking advantage of the difficulties in the European banking sector by taking market share but trouble at a multinational with a big presence in US capital markets like Deutsche Bank carries huge counterparty risk."

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The Cryan intervention: Full memo to employees

Dear Colleagues,

You will have seen speculation in the media that a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns. We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.

I understand if you feel concerned by the extensive coverage on this issue. Our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price.

It is our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.

Deutsche Bank has strong fundamentals. Let me mention some of the most important facts at this point:

  1. We fulfil all current capital requirements and our restructuring is well on track. We completed the disposal of the British insurer Abbey Life this week and the sale of our stake in the Chinese Hua Xia Bank will be finalised soon. This will further improve our capital ratio.
  2. We have significantly decreased our market and credit risk in recent years. At no point in the last two decades has the balance sheet of Deutsche Bank been as stable as it is today.
  3. Despite low interest rates and a difficult environment we posted a pre-tax profit of about €1bn euros in the first half of 2016. Before extraordinary items like restructuring costs, we earned about €1.7bn. This demonstrates the operating strength of Deutsche Bank.
  4. In a situation like this, the most important factor is our liquidity reserves. Currently they still amount to more than €215bn. This is an extremely comfortable buffer. This is clear proof of how conservatively we have planned. This is acknowledged by numerous banking analysts.

There is therefore no basis for this speculation. Nor can uncertainty about the outcome of our litigation cases in the US explain this pressure on our stock price, if we take the settlements of our peers as a benchmark.

You have all done a tremendous job over the past few days. You are the ones who are in constant contact with our clients and making it clear how Deutsche Bank is really doing. You are Deutsche Bank – that is impressively clear. All of us in the Management Board highly appreciate it.

You will hear back from me soon. Please keep working as you have been doing so far. We are and we remain a strong Deutsche Bank.

Yours sincerely,

John Cryan