Following confirmation over the weekend that the rumors were false of a lower-priced 'deal' with The DOJ somehow saved Deutsche Bank from its potential liquidity crisis; Deutsche Bank assets are notably marked down this morning. Despite Germany being closed, Credit markets are trading in the US and Europe with CDS spiking to new record highs (extending Friday's decoupling).
Counterparty Risk hedges are soaring... (1Y SUB CDS +84bps at 548bps)
while repeated attempts by the likes of Reuters to get additional information from either the DOJ, the German government or Deutsche Bank itself, have proven fruitless, overnight Frankfurter Allegemeine Zeitung reported that Deutsche Bank executives are heading to the United States in the coming days to negotiate the $14 billion settlement over a fine the infamous $14 billion for misselling RMBS.
The FAZ did not cite any sources for its report. Deutsche Bank did not immediately respond to a request for comment on Chief Executive John Cryan's travel plans.
In other words, not only was the $5.6 billion "agreed upon" number, as "reported" by Twitter and then AFP, bogus, but the actual negotiations have not yet even begun.
And Bloomberg reportsing that Deutsche Bank is most likely to tap existing shareholders for funds to help weather mounting legal costs as other options including a sale of the asset management business or a merger with Commerzbank AG are more damaging, Autonomous Research LLP said.
The lender may face litigation charges of $5.6 billion in an investigation of the U.S. Department of Justice tied to residential mortgage-backed securities and $2.5 billion in a money-laundering probe into its Russian operations, sparking a capital shortfall of as much as 9.5 billion euros ($11 billion), Stuart Graham, chief executive officer at Autonomous, said in a note on Monday. While the lender has several options, they’re all “unattractive,” he said.
“Deutsche has waited too long to conduct yet another rights issue, in our view,” Graham wrote, who has an underperform on the shares. “It has understandably been fearful of raising equity ahead of settling its major litigation cases with the U.S. DOJ.”
A spokesman at Deutsche Bank declined to comment.
Investors see a rights issue as the “most likely tool management will use” to restore market confidence, Autonomous said in the note, citing a Procensus survey with 202 respondents. Clawbacks and scrapping bonuses were the second-most likely outcome, while a merger with Commerzbank ranked last of six options considered, according to the note.
And the decoupling between credit and equity markets extends...
In the pre-market, DB ADRs are fading modestly for now...
And European bank stocks are sliding...
As are US equities...