Deutsche Bank buys back $740mn of dollar bonds

Frankfurt / AFP

Deutsche Bank has announced further results of the bond buyback scheme aimed at boosting confidence in its financial solidity, insisting that the low take-up was proof of investors’ trust in Germany’s biggest lender.
Earlier this month, Deutsche Bank had announced plans to repurchase up to $2.0 billion of dollar-denominated securities, as well as 3.0 billion euros of euro-denominated securities.
The moves were part of a multiple offensive which also saw its new chief executive John Cryan take the unusual step of issuing a public statement and writing to Deutsche Bank’s employees to say that the group “remains absolutely rock-solid, given our strong capital and risk position.”
The results of the bond buyback programme bore out investors’ continued confidence in the bank, Deutsche Bank insisted.
Of the euro-denominated bonds, investors had tendered a total 1.27 billion euros ($1.4 billion) for it to buy back.
And it said that it has bought back $740 million of its own dollar-denominated bonds.
Both amounts were smaller than expected, but Deutsche Bank interpreted that as a positive sign.
“The relatively low investor participation in the public tender offers for both the euro-denominated and US dollar-denominated securities tendered reflects improved market sentiment and an investor preference to retain exposure to Deutsche Bank,” the statement explained.

POSITIVE IMPACT ON PROFITS
Deutsche Bank said it expects to record a gain in the first quarter of 2016 of
approximately 15 million euros from the repurchase of US dollar-denominated
securities and 40 million euros from the tender for euro-denominated securities.

The entire European banking sector lost about a fifth of its market capitalisation in January, dragged down by weakness in the eurozone economy and challenges facing banks from ultra-low interest rates and regulatory pressures.
But Deutsche Bank has taken a bigger battering because it is also entangled in a web of legal woes. Its share price has plunged by a third since the beginning of the year.
The bank faces a quagmire of as many as 6,000 different litigation cases, the provisions for which helped push it to a record loss of 6.8 billion euros last year.
It was fined last May a record $2.5 billion for its involvement in rigging interest rates, and has faced probes by Swiss authorities for suspected price fixing on the precious metals market.
US investigators have also looked into its Moscow branch on suspicion of possible involvement in money laundering.
Nevertheless, in a piece of good news for the bank last week, Germany’s financial sector watchdog, BaFin, said it had closed several major special audits of Deutsche Bank, including those on interbank offered rates (IBOR), Monte dei Paschi di Siena and precious metals.
“Accordingly, BaFin does not see the need to take further action against the bank or former and current members of the management board with respect to the closed special audits,” Deutsche Bank said.
On the Frankfurt stock exchange on Monday, Deutsche Bank shares were outperforming the overall market, showing a gain of 0.31 percent, while the blue-chip DAX 30 index was down 0.68 percent.