Berlin and Deutsche Bank deny rescue plan was drawn up for lender

German Chancellor Angela Merkel's government joined the chief of Deutsche Bank in rejecting a media report that said Berlin had drawn up an emergency rescue plan for the country's ailing top bank.

"The report is false," the Finance Ministry said in a statement on Wednesday. "The federal government is not preparing a rescue plan."

The ministry's denial echoed remarks made earlier by Deutsche Bank chief executive John Cryan in an interview with Germany's daily Bild.

"State aid is not a theme for us," said Cryan, who also ruled out the bank mounting a capital increase to help pay for its litigation costs.

"At no point did I ask the chancellor for support. Neither did I suggest anything like that," he said.

Cyran's comments follow reports that said he had asked Merkel for her support in dealing with a threatened 14-billion-dollar fine in the United States linked to the sale of mortgage-backed securities in the run-up to the 2008 financial crisis.

But Cyran insisted that such a move would be "out of the question," with the Frankfurt-based bank having insisted earlier this week that it would resolve its own problems.

The 14-billion-dollar fine forms part of a string of costly lawsuits that Deutsche has faced in recent years, forcing it to sharply increase its reserves for litigation.

The bank's total market capitalization currently stands at 18 billion euros.

The media speculation about Deutsche's future has sent the bank's shares on a roller-coaster ride this week.

A report this week in Focus magazine that said Merkel had rejected an appeal by Deutsche to help it pay the potential US fine sent the bank's shares tumbling to a record low of 10.18 euros (11.04 dollars).

However, the shares rebounded on Wednesday when the weekly Zeit reported that the government has in fact drawn up a contingency plan to ensure that Deutsche survives its current crisis.

The demand from the US authorities had resulted in "much concern," Cryan said in his Bild interview. "Although it was clear from the beginning that we would not pay this sum," he said.

But he said: "At the moment there is no question of a capital increase.

"We have far fewer risks on our books than before and we have a comfortable supply of free liquidity, of cash," he said.

Deutsche also announced on Wednesday that it had agreed to sell its British insurance offshoot Abbey Life to life insurer Phoenix Group for 1.1 billion euros.

The bank said the sale would help it to boost its core capital ratio, which is the amount of funds banks are required to have on their books.

However, it said it would result in a pre-tax loss of 800 million euros for the bank following a writedown of the value of its business and intangible assets.

Last update: Wed, 28/09/2016 - 16:03


More from Business

Ericsson Nikola Tesla sees sales revenues jump 17%

Telecommunications equipment manufacturer Ericsson Nikola Tesla generated sales revenues of HRK 1.3 billion in the...

Atlantic Grupa reports drop in sales revenues, increase in net profit

Atlantic Grupa earned HRK 3.78 billion in sales revenues in the first nine months of 2016, which was 4.9% less than...

Twitter cuts more jobs, ends Vine app in pursuit of profitability

The social media service Twitter will lay off about 9 per cent of its workforce worldwide, the company announced...

China-owned Volvo Cars' third-quarter net profit doubles

China-owned Volvo Cars on Thursday said third-quarter net profit doubled, driven by strong sales in China and the...

HT revenues stagnate, net profit rises in first nine months

The Croatian Telekom (HT), posted a net profit of 752 million kuna in the first nine months of 2016, while its...