The stock prices of Deutsche Bank (NYSE:DB) has reached a new low. This follows a report released during the weekend in Focus magazine, where it was mentioned that the German Chancellor, Angela Merkel, has refused issuing state aid to the bank. The report fueled concerns that the bank’s financial condition was weak.
Quoting government officials, the magazine further reported that Merkel has also denied getting involved in a dispute with the US concerning a $14 billion bill on sales of mortgage products.
Stock prices of the bank have gone down by more than 50 percent this year alone. The stock was trading at 10.73 euros in Frankfurt at 1.55 PM, a climb down of 52 percent. It reached a new low of 10.62 euros, which is the lowest since the 1980s.
The bank’s officials have however said that they did not expect the Chancellor to get involved and intervene with the United States.
The issued statement said,
At no point has the Chief Executive John Cryan asked Chancellor Merkel to intervene in the residential mortgage-backed securities issue with the US Department of Justice. Deutsche Bank is determined to meet the challenges on its own.
John has been trying to revive the bank and its capital by shrinking and cutting thousands of jobs. But those efforts have been put at risk since the U.S. Justice Department asked Deutsche Bank (NYSE:DB) to pay $14 billion as the settlement for residential mortgage-backed securities. The bank replied by disputing the claims and said they had no intention of settling the civil claims.
However, in a memo addressed to the staff members earlier this month, the Chief Executive pledged that they will resolve “important litigation cases” while trying to restructure the bank. John Cryan has also ruled out selling their asset-management business to raise capital. The call to merge with Commerzbank AG, a rival, has also been ruled out.
Some analysts have speculated that Deutsche Bank might have to tap investors to raise the capital to pay off the $14 billion since the German government has said no to bail them out. But that is not going to be an easy task. Deutsche Bank, which is one of the largest banks in Germany, is yet to tell a number to their investors.
It has also been speculated that eventually, the bank will reach a settlement between $3 billion and $3.5 billion. Deutsche Bank may have to shell out an additional $1 towards litigation charges.