Deutsche Bank nears $5.4 billion settlement over mortgage bonds


"A zombie financial system at some point translates into a zombie economy".

Analyst Oliver Roth with Oddo Seydler Bank said this is not a repeat of the near collapse of eight years ago: "This is not a crisis similar to Lehman [Brothers] because the authorities, the regulators and countries have learned a bank like this can not default because of its position in the system".

In the other corner stand investors wracked with nerves.

Cognizant shares plunged 14.6 percent, making it the biggest loser among S&P companies, after the IT services provider said it was conducting an internal investigation into possible violations of US anti-corrupt practices laws related to payments in India.

Such a payout, analysts fear, could undermine the bank's capital foundations, already weakened in the European Union's economic woes. "The ghost of Lehman has crept back into the minds of market participants".

"It is not a matter of available liquidity, at least for now, but of irreversible damage to confidence in the bank", wrote BNP Paribas' analysts Geoffroy de Pellegars, Miguel Hernandez, and Marco Busin to clients on Friday. More specifically, a situation of unchecked financial weakness could result in numerous consequences, including depositor flight and the collapse of credit lines, he told CoinDesk.

Deutsche Bank has been at the forefront of investor worries for weeks now, ever since authorities in the United States revealed they are seeking $14 billion from the bank to settle legal claims over its sales of mortgage securities in the run-up to the global financial crisis in 2008.

Shares in the bank, that was until recently seen as one of the strongest in Europe, fell 9% to €9.92, a slump of nearly two-thirds compared to last November, before recovering slightly later.

About 7.5 billion shares changed hands on US exchanges, above the 7.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.

The bank's tumble as the Frankfurt stock market opened saw shares fall by more than 9.0 percent at one point, hitting a historic low of 9.90 euros.

It is loaded with risky financial trades called derivatives and has struggled for years to turn its business around, particularly its investment banking unit.

BONDS: Bond prices sank. "Some forces in the markets are now trying to damage this trust".

In theory, Europe should be prepared for a crisis such as this.

Investors are now openly asking whether the bank will need a bailout.

South Korea's won fell 0.2 percent, the Indonesian rupiah lost 0.3 percent and the Australian dollar slipped 0.6 percent.

"They are well capitalized".

Like other European banks, its profit margins have been squeezed by record low benchmark interest rates.

Fabrizio Camelli, head of Deutsche Bank's wealth management business, directly addressed the Bloomberg report, telling a German newspaper that the bank had not seen "any noticeable outflow of client funds".

"We have become the object of hefty speculation", he said. JPMorgan Chase was up 1.6 percent.

That's why many experts expect some sort of deal to help the bank, should it be needed.

Unlike Lehman, Bear, and AIG, Deutsche has some €600 billion in customer deposit - a huge reserve against a cash crunch - more than €200 billion in liquid assets, and full access to the European Central Bank's emergency loans.



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