$5.4bn Fine Kindles hopes of Deutsche Bank

Deutsche Bank’s seesaw shares bounced bank and ended another rollercoaster day on the stock market with an unexpected share price surge on hopes of $5.4bn US settlement. Shares in Europe’s biggest bank leaped 6.4per cent to close up €11.57, their biggest one-day rise since April, on the back of speculation that the $14bn charge the DoJ recommended previously this month, to settle a probe into the mis-selling of mortgages securities would be more than halved.

John Cryan, reassured employees and renewed confidence in the lender at the end of another dramatic day. Earlier, shares in the Europe’s biggest bank had dived as much as 9 per cent to below €10, their lowest since the 1980s, amidst fears that clients were starting to abandon the lender.

On Thursday, its stock dropped after 10 hedge funds had withdrawn some cash to trim their exposure to Deutsche, flickering worries that other clients could follow suit, exercising even greater pressure on the bank. The cost of insuring Deutsche’s debt against default using credit default swaps also surged.

Those market moves initiated Mr Cryan to issue a memo to staff urging that the bank had an extremely comfortable buffer of liquid assets and remained strong. In his words, the ongoing rumors are inducing significant swings in their stock price. The step to be taken now is to prevent blurred perception from further interrupting their daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to distort this trust.

Mr. Cryan’s reassuring comments, which appeared to accuse short-sellers for the lender’s anguish, helped Deutsche’s shares pare their losses. The stock then rose in the final minutes of trading following a report that the bank was close to a settlement with the DoJ that would see its fine fall from $14bn to $5.4bn.

The issue of a $14bn fine for mis-selling mortgaged-backed securities in the run-up to the financial crisis stimulated the crisis this month. Investors have feared that the DoJ charge could hastened Deutsche’s collapse, since it dwarfs the $5.5bn the lender has currently set aside for lawsuits and penalties. The bank has been forced to deny it was seeking a government rescue, which in any case would be very difficult to execute under EU rules.

The Asia market scenario goes in this way; it stumbled on Friday, the final trading day of the quarter, after concerns over Deutsche Bank threatened investor sentiment.

Indian shares were slightly lower, with the Nifty 50 index down 0.03 per cent, after falling 1.76 per cent on Thursday. The Sensex, which dropped 1.64 per cent in the previous session, traded down 0.18 per cent on Friday afternoon.