Germany’s leading bank, Deutsche Bank AG (USA) (NYSE:DB), said it was considering buying back several billion euros of its debs as it endeavors to boost is poor performing securities following the backdrop of a collapsing financial stocks.
The announcement came after most European banks suffered a second day’s fall. The German bank is expected to turn to its emergency buyback plan on senior bonds where it has about €50bn in issue. The move by the bank is unlikely to include the contingent convertible bonds which, coupled with the bank’s shares have witnessed a mass sell-off.
By buying back bonds at face value, the Deutsche Band looks to generate capital gains. The announcement by the bank came as the finance ministerWolfgang Schäuble moved to eliminate any doubts in the market. The minister said that there were no concerns about the bank while the chief executiveJohn Cryan said that the bank was absolutely stable.
Negative share performance
The bank has seen its shares falls by 4% reaching a new low of 40% this year. Compared to other European banks, the Deutsche Bank faired quite well. Credit Suisse for instance, dropped by 8% while the UniCredit bank dropped 7%. The poor performance has not gone well with investors as thy face a relatively weak European bank capital earnings coupled with tribulations facing the broader market. The US bank, which has not been spared, was marginally weaker as by midday on Tuesday.
Investors are now concerned with the likely of negative interest rates across the developed countries. Japan is the first big economy with a negative borrowing rate to 10 year debts as the number of government bonds trading with negative gains increased to a new high of $6tn.
The concerns regarding the solidity of banks debt has seen more investors rush to take protection measures. A credit results index that helps track the likelihood of a default of investment grade debt by European banks traded at 119 points in Tuesday, reaching a new high since June 2013. More concerns regarding the health of the financial sector has been raised coinciding with the questions regarding the planned Deutsche Bank restructuring.