Deutsche Bank: 5 Scenarios for the German Bank

The initial $14bn demand from the DoJ — rejected by Deutsche Bank — threatens to undermine investor and client confidence in Germany’s biggest lender. Analysts think the market jitters over the fine have exposed much deeper structural weaknesses plaguing Europe’s banking system: negative interest rates, weak economic growth and tightening regulation are all dragging the industry’s profitability far below its cost of capital. Europe’s biggest investment bank, which has a €1.8tn balance sheet and employs 100,000 people, is teetering on the brink of an existential crisis. Here are five things to watch for what happens next at the German bank. Achieving a settlement with the DoJ is Mr Cryan’s top priority, and he has been spending most of his time recently in the US trying to bring talks swiftly to a close. If Deutsche Bank could settle the case for close to its $3bn-$5bn target and complete the sale of its $4bn minority stake in China’s Huaxia Bank, it could put a stop to swirling speculation about its weak capital position. This should trigger a rebound in its share price, which has slumped to three-decade lows, and shore up client confidence in its financial position. The bank could then present investors with a beefed up strategy to rebuild profitability and strengthen its balance sheet when it presents quarterly results in late October. Crisis over.

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