U.S. stock indexes are poised to recover some ground on Friday following sharp selling on Thursday over concerns about Deutsche Bank, whose shares hit a record low this week, amid speculation the German bank may need to issue new equity to address a capital shortfall.
Deutsche Bank’s revenue generated from trading has tumbled this past year and a mid September fine of $ 14 billion from the Department of Justice fine to settle civil claims from mortgage backed securities helped pushed shares of the German bank to a new low earlier this week.
Deutsche Bank CEO John Cryan wrote a reassuring letter to employees on Friday and explained that “our bank has become subject to speculation” while emphasizing that Deutsche Bank has strong fundamentals.
“There is therefore no basis for this speculation. Nor can uncertainty about the outcome of our litigation cases in the U.S. explain this pressure on our stock price, if we take the settlements of our peers as a benchmark” Cryan wrote.
Cryan noted that Deutsch Bank’s liquidity reserves still amount to more than € 215 billion.
“This is an extremely comfortable buffer” he said.
Shares of Deutsche Bank dropped over 6 percent on Thursday following a Bloomberg report that a number of hedge funds engaging in derivatives with the bank had withdrawn some excess cash and cut their exposure with the bank.