Deutsche Bank and its biggest investor sought to reassure shareholders and staff of its financial strength after a ratings downgrade cast doubts on its turnaround plans.
Shares in Deutsche Bank closed at an all-time low on Thursday as the fallout from past misadventures in investment banking haunted chief executive Christian Sewing's attempt to return the lender to its corporate banking roots.
A source familiar with the thinking of the European Central Bank, which regulates Deutsche Bank, and its top shareholder HNA Group Co of China, said on Friday they supported management in efforts to restore long-term profitability.
This followed a report in the Wall Street Journal on Thursday that the US regulator viewed the lender as “troubled” last year, and a Standard & Poor's downgrade of Deutsche Bank’s credit rating to BBB+ from A- on Friday.
Meanwhile in Australia, federal prosecutors were preparing criminal cartel charges against Deutsche, as well as the country’s third-largest bank and Citigroup, over a $2.3 billion share issue. All deny wrongdoing.
Sewing, a Deutsche Bank ‘lifer’ appointed in April after the removal of former chief executive John Cryan, said in a letter to staff: “At group level, our financial strength is beyond doubt.” But he admitted the newsflow was “not good”.
S&P questioned Sewing’s ability to get Deutsche Bank back to profit by scaling back its global investment bank and focusing on Europe and Germany after three years of losses.
“We see significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,” S&P said.
Credit ratings are especially crucial for a bank such as Deutsche, whose perceived health is important in winning business. Deutsche Bank is a big issuer of debt securities whose cost is highly reliant on credit ratings.
S&P had rated Deutsche Bank’s long-term credit at A-, on negative credit watch. That was one or two notches below most European competitors. By comparison, S&P rates Switzerland's UBS at A+ with a stable outlook.
Sewing also addressed US regulatory concerns following the report that said the Federal Reserve had designated Deutsche Bank’s operations as in a “troubled condition”.
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Read more:
[ S&P cuts Deutsche Bank rating in latest blow for Sewing’s revamp ]
[ Deutsche Bank to slash at least 7,000 Jobs to cut cost and boost profit ]
[ Deutsche Bank to focus on Europe in sweeping overhaul of its investment bank ]
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The WSJ report sent Deutsche Bank’s shares down 7 percent on Thursday to their lowest-ever closing level, valuing it at $22bn. They recovered by 4 percent on Friday.
Five-year credit default swaps, a measure of the bank’s risk of defaulting on its obligations, fell by 16 basis points to 172 basis points as its shares rebounded, IHS Markit data showed.
Sewing said Deutsche Bank’s credit and market risk levels had rarely been so low, speculation it was exposed to political uncertainty in Italy was unfounded and funding plans for this year were well advanced.
Deutsche Bank was well positioned to react to excessive moves in debt markets, Sewing said, adding that a series of enforcement actions by the US Federal Reserve were principally related to weaknesses in internal controls and infrastructure.
“We have made progress in remediating them over the past year. We’re not yet where we want to be, but we are steadily getting there.”
In a rare intervention following the US reports, European banking regulators said Deutsche had made “good progress” in its efforts to address regulatory concerns.
“The bank now has a tighter management team, good capital and liquidity, and supervisors are reassured by the plans they see,” a source familiar with the ECB’s thinking said.
Chinese investor HNA Group, which controls an 8 per cent stake in Deutsche Bank, said it supported the bank’s management and its strategy.
“HNA remains committed to Deutsche Bank's long-term success and looks forward to continuing to work with the management team in support of that goal,” a spokesman for HNA said.
In numbers
1,000 tonnes of waste collected daily:
- 800 tonnes converted into alternative fuel
- 150 tonnes to landfill
- 50 tonnes sold as scrap metal
800 tonnes of RDF replaces 500 tonnes of coal
Two conveyor lines treat more than 350,000 tonnes of waste per year
25 staff on site
COMPANY PROFILE
Name: Xpanceo
Started: 2018
Founders: Roman Axelrod, Valentyn Volkov
Based: Dubai, UAE
Industry: Smart contact lenses, augmented/virtual reality
Funding: $40 million
Investor: Opportunity Venture (Asia)
MATCH INFO
Uefa Champions League, semi-final result:
Liverpool 4-0 Barcelona
Liverpool win 4-3 on aggregate
Champions Legaue final: June 1, Madrid
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
T20 World Cup Qualifier A, Muscat
Friday, February 18: 10am - Oman v Nepal, Canada v Philippines; 2pm - Ireland v UAE, Germany v Bahrain
Saturday, February 19: 10am - Oman v Canada, Nepal v Philippines; 2pm - UAE v Germany, Ireland v Bahrain
Monday, February 21: 10am - Ireland v Germany, UAE v Bahrain; 2pm - Nepal v Canada, Oman v Philippines
Tuesday, February 22: 2pm – semi-finals
Thursday, February 24: 2pm – final
UAE squad: Ahmed Raza (captain), Muhammad Waseem, Chirag Suri, Vriitya Aravind, Rohan Mustafa, Kashif Daud, Zahoor Khan, Alishan Sharafu, Raja Akifullah, Karthik Meiyappan, Junaid Siddique, Basil Hameed, Zafar Farid, Mohammed Boota, Mohammed Usman, Rahul Bhatia
All matches to be streamed live on icc.tv
Building boom turning to bust as Turkey's economy slows
Deep in a provincial region of northwestern Turkey, it looks like a mirage - hundreds of luxury houses built in neat rows, their pointed towers somewhere between French chateau and Disney castle.
Meant to provide luxurious accommodations for foreign buyers, the houses are however standing empty in what is anything but a fairytale for their investors.
The ambitious development has been hit by regional turmoil as well as the slump in the Turkish construction industry - a key sector - as the country's economy heads towards what could be a hard landing in an intensifying downturn.
After a long period of solid growth, Turkey's economy contracted 1.1 per cent in the third quarter, and many economists expect it will enter into recession this year.
The country has been hit by high inflation and a currency crisis in August. The lira lost 28 per cent of its value against the dollar in 2018 and markets are still unconvinced by the readiness of the government under President Recep Tayyip Erdogan to tackle underlying economic issues.
The villas close to the town centre of Mudurnu in the Bolu region are intended to resemble European architecture and are part of the Sarot Group's Burj Al Babas project.
But the development of 732 villas and a shopping centre - which began in 2014 - is now in limbo as Sarot Group has sought bankruptcy protection.
It is one of hundreds of Turkish companies that have done so as they seek cover from creditors and to restructure their debts.
'The Ice Road'
Director: Jonathan Hensleigh
Stars: Liam Neeson, Amber Midthunder, Laurence Fishburne
2/5
SPECS
Engine: Supercharged 3.5-litre V6
Power: 400hp
Torque: 430Nm
On sale: Now
Price: From Dh450,000
Straightforward ways to reduce sugar in your family's diet
- Ban fruit juice and sodas
- Eat a hearty breakfast that contains fats and wholegrains, such as peanut butter on multigrain toast or full-fat plain yoghurt with whole fruit and nuts, to avoid the need for a 10am snack
- Give young children plain yoghurt with whole fruits mashed into it
- Reduce the number of cakes, biscuits and sweets. Reserve them for a treat
- Don’t eat dessert every day
- Make your own smoothies. Always use the whole fruit to maintain the benefit of its fibre content and don’t add any sweeteners
- Always go for natural whole foods over processed, packaged foods. Ask yourself would your grandmother have eaten it?
- Read food labels if you really do feel the need to buy processed food
- Eat everything in moderation
Company Profile:
Name: The Protein Bakeshop
Date of start: 2013
Founders: Rashi Chowdhary and Saad Umerani
Based: Dubai
Size, number of employees: 12
Funding/investors: $400,000 (2018)
Company Profile
Name: JustClean
Based: Kuwait with offices in other GCC countries
Launch year: 2016
Number of employees: 130
Sector: online laundry service
Funding: $12.9m from Kuwait-based Faith Capital Holding
RESULT
Arsenal 2
Sokratis Papastathopoulos 45+4'
Eddie Ntkeiah 51'
Portsmouth 0