The Chancellor of Germany has launched efforts to reassure investors about the financial stability of Deutsche Bank, the country’s largest bank. The bank’s share price has plummeted in both Europe and the United States, following the surge in Credit Default Swap (CDS) and the sell-off of financial instruments classified as Tier 1 capital.
In response, the Chancellor of Germany has stated that Deutsche Bank has undergone restructuring and modernized its business model, and that it is a bank that can generate significant profits. She urged investors not to speculate about the bank’s future, adding that several analysts have also reassured investors that Deutsche Bank will not follow the same path as Credit Suisse.
Analysts predict that Deutsche Bank’s profits will reach €5 billion ($5.4 billion) in 2022, up 159% from 2021, and that the bank will generate profits for 10 consecutive quarters.
Deutsche Bank’s AT1 holdings have also caught the attention of investors, following the Swiss government’s announcement to cut the value of Credit Suisse’s AT1 to zero. The move has created investor confidence in Deutsche Bank’s AT1 holdings in the event of a possible bankruptcy.
Deutsche Bank has total assets of approximately $1.4 trillion and manages around $880 billion in assets. It is also classified as a Systemically Important Financial Institution (SIFI), which is a category for financial institutions deemed too big to fail. This category ensures that the government issues measures to prevent banking crises in such institutions from spreading throughout the financial system.
The Chancellor of Germany’s efforts to build confidence in Deutsche Bank come at a crucial time, as the bank strives to overcome the challenges posed by the pandemic-induced economic slowdown and the overall volatility of the financial markets.