Deutsche Bank set for £6.6bn lifeline

Just as it looked on the verge of collapse...

DEUTSCHE Bank shares bounced back after hitting a new low on rumours that it had negotiated down a crippling £10.8bn fine.

Shares in the beleaguered German lender leapt 13.2pc after it appeared to strike a deal with the US Department of Justice over penalties for mis-selling toxic bundles of mortgage debt in the run-up to the financial crisis.

It was feared the original fine could destroy the bank, which has lost more than half its value in the past year and is now worth just £13bn. But last night it was claimed that crisis talks had resulted in the amount being cut to a more manageable £4.2bn.

The £6.6bn reduction will be a potential lifeline for the bank.

The DoJ and Deutsche both declined to comment on the claims. But they still sparked a wild swing in Deutsche’s share price, which had initially plunged 9pc to an all-time low in morning trading after ten hedge funds pulled money out of the stricken lender.

Artur Fischer, head of the Berlin stock exchange, said markets had been ‘ playing with dynamite’ by driving down the share price. ‘ Deutsche has to come up with some good news,’ he said. ‘The market has to be put at ease.’

There are growing concerns for the European banking system. Fellow German firm Commerzbank is axing 9,600 jobs by 2020 and withholding dividends to pay for a £950m restructuring programme.

And yesterday it was reported Dutch financier ING was preparing to announce thousands of job cuts as part of a restructure.

The German government has repeatedly denied it would rescue Deutsche if it went to the wall, despite reports a secret bailout plan had been drawn up.

Chief executive John Cryan – who is said to be in America and locked in talks with US officials – said the bank did not need state support and had not asked for it.

The lender has been described by the International Monetary Fund as the world’s most dangerous bank.

If it were to fail, there are concerns that the eurozone and even the European Union might come crashing down with it.

It would be the biggest shock to the financial system since the collapse of Lehman Brothers in 2008 and could set off a fresh crisis.

But a taxpayer bailout would potentially deal a fatal blow to German Chancellor Angela Mer- kel’s credibility ahead of next year’s elections.

Jeroen Dijsselbloem, president of the Eurogroup of finance ministers for countries in the single currency, yesterday said Deutsche must survive ‘on its own’.

A report on Thursday night that ten hedge funds had moved part of their listed derivatives holdings to other firms sent shares crashing. Investors feared it showed a dangerous loss of confidence in the bank, although most of Deutsche’s more than 200 derivatives-clearing clients have made no changes.

In a memo to staff yesterday, Cryan said that market reaction was overblown and the lender was on solid ground.

He said the bank’s fundamental strength was reflected in its £185bn of liquidity reserves.

‘There is therefore no basis for this speculation,’ he wrote. ‘It is our task now to prevent distorted perception from further interrupting our daily business.’