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Deutsche Bank AG shares dropped to a record and its riskiest bonds declined amid concerns about the lender’s ability to withstand mounting legal costs, with some hedge funds moving to reduce their financial exposure.
The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person with knowledge of the situation who declined to be identified talking about confidential client matters.
In a memo to staff published on Friday, Deutsche Bank Chief Executive Officer John Cryan responded to what he called media speculation causing some “unjustified concerns,” saying that the bank’s balance sheet has never been more stable over the past two decades.
“Ongoing rumors are causing significant swings in our stock price,” he wrote. “It’s our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.”
The shares dropped 4.4 percent to 10.40 euros at 11:52 a.m. in Frankfurt after declining below 10 euros for the first time. The lender’s 1.75 billion euros ($2 billion) of 6 percent additional Tier 1 bonds, the first notes to take losses in a crisis, fell as much as five cents on the euro to 69 cents, a record low, according to data compiled by Bloomberg. Credit-default swaps on the lender’s junior bonds reversed an earlier increase, falling 17 basis points to 513 basis points, according to CMA. Contracts on the senior bonds pared an earlier increase to 247 basis points, the data show.
Full article on Bloomberg
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