The turbulence on the stock markets bring German Bank CEO John Cryan increasingly in distress. In desperation, he plans to buy back bonds of the Institute, according to a media report. He could be so calm the markets and protect his house against further attacks. Cryans message to the investors would be: The German bank is doing everything possible to strengthen their capital base. The Institute wanted the rumors did not comment.
Investors reacted pleased. For them, already the rumor was like a tranquilizer. The share price rose by up to 17 percent – it was the strongest rise in seven years. But these successes could quickly fizzle. Cryans bond trick is unlikely to improve the difficult situation of the Institute.
The German bank has so far this year weakest stock on the German DAX benchmark index. Credit default swaps, so-called credit default swaps, which insure investors against losses at Deutsche Bank, reached the highest level for over four years. In recent days, prices doubled even.
Future interest payments saved
doubt the investors that CEO John Cryan, the bank in the face of volatile markets, may establish successful new lower revenues and ongoing litigation. The Institute is also regarded as too weak capitalized. Again and again there are rumors the bank would have to tap the markets and ask for money again.
The possible debt buyback, the German bank will reportedly on paramount title, so-called senior bonds, concentrate. This was the last institution in the amount of 50 billion euros in circulation. could pay the bank a buy-back of a portion thereof, covering reserves on the balance sheet. With a buy-back of bonds below par, the Bank could reap a capital gain and to save future interest payments.
The nominal value is the price that the institution pay the investors takes when the bonds regularly expire in a few years. At this price, they are also in the bank’s books. Really attractive is such a bond buy-back but only if the papers are heavily traded below par -. What they do in the case of Deutsche Bank
Another effect of Cryan plan is that will create new demand for the bonds, so that their loss of value could be slowed. Drawback is that the bank would take leeway for new investments and business.
The buyback Cryan will take the investors these fears of a capital increase and strength to prove. The Bank had the resources for repurchases its bonds, but not yet taken a decision, said a person familiar with his plans person.
German bank struggles to trust
So far, the price discount, according to assessment of market watchers still not high enough to justify a buyback. The profit of Deutsche Bank would be, according to analysts, only 250 million euros and would thus have a noticeable impact on their capital strength. “The buyback would be purely cosmetic. It strengthens not the capital base of Deutsche Bank, but should help to reassure investors,” says one analyst. That the Frankfurter Geldhaus forced sees could be regarded as weakness
By contrast, the German Bank defends. The Institute was given its financial strength and its risk position “absolutely rock solid” Cryan wrote to employees. This was the bank underlined with its announcement on Monday evening that she could pay the promised interest on special loans. Actually, this is a matter of course, just for a bank whose most important asset in the market is confidence.
New bad news by Postbank
In addition, could be just a flash in the pan the current rally. On Wednesday evening, there were already rumors of bad news. So supposedly the German banking subsidiary Postbank, which currently stands at just under 4.5 billion euros in the books, are written down to € 2.8 billion, said two people familiar with the deliberations told Reuters. “Thus, the bottom is reached well,” said an insider. Depreciation will come, whether Postbank will placed at the end of the stock market or still sold. Because the market environment was difficult and previous expressions of interest did not go beyond a bargain price. Among other things, several Chinese bidders had raised his hand, said two other insiders.
The German bank said it had the value of Postbank in the third quarter after corrected below. “Possible further effects could occur when the closing of the sale is approaching – what will be dependent on the market at this time, but it is too early to speculate about the possible outcome..” The Chinese bidders, the Institute declined to comment.
The separation of the Postbank plays in repositioning an important role, because the German bank will shrink. The Bonn Institute with yellow branches belongs since 2010 mainly to industry leader who so wanted to expand its private client division as a second pillar alongside investment banking. The expectations were never met because the mass market low yields. Even the original purchase price was adjusted downwards because the acquisition was in the middle of the financial crisis. The actually estimated at eight billion euros Postbank was 1.7 billion euros cheaper
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