• Germany's news in English
Deutsche Bank stock price crash
Five reasons why Germany is worried about Deutsche Bank
File photo: DPA

Five reasons why Germany is worried about Deutsche Bank

The Local · 10 Feb 2016, 10:46

Published: 10 Feb 2016 10:46 GMT+01:00

Facebook Twitter Google+ reddit

1. It's shrinking after two decades of expansion

Deutsche grew quickly over the past 20 years as it sought to challenge some of the world's biggest investment banks – mostly in the US.

But that strategy hasn't worked, and last June its former co-CEOs announced they were stepping down.

Deutsche Bank's new CEO John Cryan. Photo: DPA

New CEO John Cryan, a Brit with a reputation for turning around struggling businesses, started in July.

By October , faced with the bank's biggest-ever quarterly loss of €6.01 billion, he was already announcing thousands of job cuts, hundreds of branch closures, and withdrawal from 10 countries.

2. The future doesn't look bright

Many investors feel unsure about how exactly Deutsche plans to make money in future – and the tumbling share price reflects that uncertainty.

Cryan's move to shrink the bank has come at the same time as market upsets caused by low oil prices, fears for the Chinese economy, and continuing problems in the Eurozone.

That's all bad news for Deutsche Bank's investment arm – which was Cryan's big hope for bringing in cash from now on.

3. Everyone is protesting too much

Senior figures at Deutsche and even German Finance Minister Wolfgang Schäuble have all tried to reassure investors, workers and account holders about the future of the bank in recent days.

The bank is "absolutely rock-solid," Cryan said in a statement on Tuesday, while Schäuble told Bloomberg he had "no concerns" about the banking giant.

German Finance Minister Wolfgang Schäuble. Photo: DPA

But the flood of insistence that everything is fine seems to be having the opposite effect to what they hoped.

The price of insurance against Deutsche failing to pay its debts – so-called "Credit Default Swaps" - has doubled in recent days.

4. It's hitting Germany as a whole

Questions over the future of Deutsche Bank mean questions over the future of Germany.

The likelihood of the German government defaulting on its debts spiked on Tuesday to its highest levels since 2014 (although it's still very low, at 1.7 percent).

That's despite new rules introduced since the financial crisis which require banks to have more money on hand, meaning that theoretically at least Berlin should not be left on the hook if Deutsche's debts are called in.

For the world's fourth-biggest economy, a loss-making top bank is a liability – especially when US rivals like JP Morgan are valued ten times higher on the stock markets and are back to making healthy profits.

5. No-one wants to buy a struggling Deutsche

One route out of Deutsche Bank's woes might be for a wealthy new owner to take it over and put it through the arduous restructuring it needs.

Story continues below…

But few financial institutions have the patience and the deep pockets that would be needed to get the floundering giant back on track.

It will take quite a lot of these to get Deutsche Bank back on track. Photo: DPA

The same new rules that make it less likely for banks to default also make them less profitable – and therefore less attractive to buyers.

That's even the case when the bank's current stock market value is just 35 percent of the value of the assets on its books.

"I don't think anyone wants to take over an investment bank at the moment," one large shareholder in Deutsche Bank told Die Welt on Wednesday.

with DPA

SEE ALSO: Deutsche Bank suffers record loss in third quarter

For more news from Germany, join us on Facebook and Twitter.

The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Student fined for spying on women via their webcams
Photo: DPA

Student from Munich fined €1,000 for spying on 32 different computers, using their webcams to take photographs, or record their keyboard history.

This is how much startup geeks earn in Germany
Photo: DPA

A comprehensive new survey of 143 startup founders shows how much you are likely to be earning at a German startup, from entry level all the way up to sitting on the board.

Man dies after beating for peeing near Freiburg church
The Johannes Church in Freiburg. Photo Jörgens Mi/Wikipedia

A middle-aged man from southern Germany has died after being attacked by a group of men who took umbrage with the fact he was urinating in the vicinity of a church.

The Local List
Seven German celebrities with uncanny doppelgängers
Former Berlin mayor Klaus Wowereit and actor Alec Baldwin. Photo: DPA; Gage Skidmore, Wikimedia Commons

Check out these seven look-a-likes of well known German figures - we admit that some are more tenuous than others...

Israel seeks to buy three new German submarines: report
A Dolphin class submarine. Photo: DPA

Israel is seeking to buy three more advanced submarines from Germany at a combined price of €1.2 billion, an Israeli newspaper reported Friday.

Here’s where people live the longest in Germany
Photo: DPA

Germans down south seem to know the secret to a long life.

More Germans identify as LGBT than in rest of Europe
Photo: DPA

The percentage of the German population which identifies as lesbian, gay, bisexual or transgender is higher than anywhere else in Europe, according to a new study.

'Reichsbürger' pair attack police in Saxony-Anhalt
File photo: DPA.

A "Reichsbürger" and his wife attacked police officers on Thursday, just a day after another Reichsbürger fatally shot an officer in Bavaria.

Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Parents who don't get nursery spot for kid entitled to pay
Photo: DPA

The Federal Court of Justice (BGH) ruled on Thursday that parents whose children don't receive placements in nursery care are entitled to compensation.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd