Talk of Deutsche Bank rescue helps euro recover some poise

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Euro buyers are daring to venture back out to play on DB rescue talk 28 Sept

The woes of Deutsche Bank have helped to undermine the euro in the past few sessions but rumours of proposed government support are helping to find dip-demand this morning.

The DAX is up 1.2% but off its highs and that's capping EUR gains for the moment as other reports dismiss the notion of Germany being able to help its own banks whilst looking down their nose at the Italian bank debacle.

EURUSD currently 1.1220 with offers/res into 1.1250 and larger interest at 1.1280 and 1.1300 still casting a shadow.

Large option expiries also in play today and they appear to be providing additional support.

EURUSD had a look above 0.8630 more than reversing the early losses to 0.8590 and that fresh demand continues to cap GBPUSD gains.

Still more to come from Draghi later, and Yellen ofc, and we can expect a lot more dancing on hot coals.


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Some Deutsche Bank clients have pulled extra cash - BBG

Funds that clear trades with Deutsche Bank have withdrawn excess cash

This story sounds like it's probably less of a worry than the screaming headlines would suggest.

Bloomberg reports that a 'number of funds' who clear derivatives with Deutsche Bank have withdrawn 'some' excess cash because of fears the bank is in trouble.

They report that about 10 of the 200 derivatives clients have made changes.

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German economic ministry declines to comment on Deutsche Bank speculation

German economic ministry out across the wires 30 Sept

Would that be the government bailout or the UBS take-over talk that's being bandied around?

  • German banking sector is well positioned

For what exactly?

  • German companies need strong partners for lending
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Some Deutsche Bank Clients Unable To Access Cash Due To "IT Outage"


While it now seems that Friday's rumor of a substantially reduced Deutsche Bank settlement with the DOJ, which sent the stock price soaring from all time lows, was false following a FAZ report that CEO John Cryan has not yet begun the renegotiation process, and in the "next few days" is set to fly to the US to discuss the proposed RMBS misselling settlement with the US Attorney General, Germany's largest lender continues to be impacted by the public's declining confidence, exacerbated over the weekend by a disturbing "IT glitch."

For one, it remains unclear if Friday's report halted, or reversed, the outflow of cash from DB's prime brokerage clients, which as Bloomberg first reported last week was a major catalyst for the swoon in the stock price. However, as UniCredit's chief economist Erik Nielsen notes in a Sunday notes, one thing is certain: "so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry."

There is also the threat of the bank's massive derivative book, which despite attempts of many pundits to gloss over, over the weekend none other than JPM admitted that that is what the markets will likely be focusing on for the foreseeable future: "In our opinion it is not so much funding issues but rather derivatives exposures that more likely to trouble markets going forward if Deutsche Bank concerns continue.  This is especially true if these concerns propagate into a confidence crisis inducing more rapid unwinding of derivative contracts."

Indeed, as we first hinted last Thursday...

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Deutsche Bank says derivatives exposure fears overblown: paper

Deutsche Bank is continuing to cut back the size of its derivatives book, which is not as risky as investors may believe, Chief Risk Officer Stuart Lewis told German weekly paper Welt am Sonntag.

"The risks in our derivatives book are massively overestimated," Lewis told the paper. He said 46 trillion euros in derivatives exposure at Deutsche appeared large but reflected only the notional value of the contracts, while the bank's net exposure to derivatives was far lower, at around 41 billion euros.

"The 46 billion euros figure sounds gigantic, but it is completely misleading. The real risk is far lower," Lewis said, adding that the level of risk on Deutsche Bank's books was in line with that seen at other investment banking peers.

"We are trying to make our business less complex and are paring back our derivatives book. Parts of it were transferred into a non-core unit some years ago."

New banking regulations imposed in the wake of the 2009 financial crisis discourage large bets on risky assets, and have forced Deutsche Bank to drastically cut back the scale of its derivatives exposure.

Derivatives are financial contracts that draw their value from the performance of an underlying asset, index or interest rate. They can be used to hedge risks.

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Deutsche Bank Talks With Justice Department Said to Continue

Deutsche Bank AG’s negotiations with the U.S. Justice Department to resolve a years-long investigation into the lender’s handling of mortgage-backed securities are continuing, according to people familiar with the matter.

Germany’s Bild newspaper reported in its Sunday edition that Chief Executive Officer John Cryan wasn’t able to reach an agreement with the Justice Department during a meeting in Washington. He was there to help negotiate potential multibillion-dollar penalties, according to the report.

The German lender and U.S. authorities haven’t broken off their talks, said the people, who asked not to be identified because discussions are private. Concerns about the bank’s ability to pay a $14 billion opening settlement bid from the Justice Department sent the company’s stock to a record low last month. Cryan has said he expects U.S. authorities to scale back the initial request.

The bank, which set aside 5.5 billion euros ($6.2 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations, including a money-launder inquiry tied to its Russia operations. Analysts at Barclays Plc speculate that could cost the bank as much as 2 billion euros.

Former CEOs

The firm is still considering seeking damages against former CEOs Anshu Jain and Josef Ackermann, Bild reported. The newspaper said the company froze a portion of bonus payments to Jain and other former top managers.

A Deutsche Bank spokesman declined to comment on the status of talks and on Bild’s article. A representative for the Justice Department also declined to comment when contacted after the newspaper report. Spokesmen for Ackermann and Jain couldn’t be immediately reached for comment outside of business hours.

Cryan, a Briton who speaks fluent German, has sought for the past three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health. The bank is holding informal talks with Wall Street firms about options to deal with legal costs, including a stock sale that could raise 5 billion euros, people with knowledge of the matter said last week.

Qatar’s royal family is also considering increasing its stake in Deutsche Bank to as much as 25 percent, according to people with knowledge of the matter.

Cryan has said the lender may fail to be profitable this year after posting the first annual loss since 2008 last year. With plans to eliminate thousands of jobs and cut risky assets, he called 2016 a peak restructuring year.


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Deutsche Bank CFO says 10k jobs should be axed from bank

Reuters with a sources story

According to Reuters sources, DB's CFO has told staff representatives that a further 10,000 jobs should go.

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