Deutsche Bank flexes financial muscle with mega bond buyback

Deutsche Bank said it would pay $7.2 billion in fines and compensation in the US over its involvement in the mortgage-backed securities crisis of 2008 (AFP Photo/DANIEL ROLAND)

Berlin (AFP) - Germany's biggest lender Deutsche Bank Friday flexed its muscle on Friday, launching a massive bond-buying programme to assuage concerns over the depth of its pockets.

The group said it would repurchase up to 4.8 billion euros ($5.4 billion) of its own outstanding bonds, adding that its liquidity position is comfortable enough to carry out the buyback.

The offer for bonds denominated in euros is worth up to 3 billion euros, while that for debt denominated in US dollars totals up to $2 billion.

The announcement sent the bank's shares shooting up 7.86 percent to 14.77 euros, outperforming the overall Frankfurt DAX index, which was up 1.89 percent.

The bank's stocks had already rocketed up more than 16 percent on Wednesday over speculation that it would repurchase bonds.

Friday's announcement marks a second offensive by the group to allay fears, after its new chief executive John Cryan took the unusual step earlier this week of issuing a public statement and writing to the group's employees to say that the bank "remains absolutely rock-solid, given our strong capital and risk position."

He also said that it has sufficient cash to pay its riskiest debts.

Separately, in Brussels, German Finance Minister Wolfgang Schaeuble also swiped aside concerns over the bank's health.

"Deutsche Bank is a strong bank and that's that," he told journalists on Friday, adding that there were "no worries" about the health of the financial institution.

It "has sufficient capital... we had taken precautions to make banks resilient after the finance and banking crisis in 2007 and 2008," he said.

The entire European banking sector had lost about a fifth of their market capitalisation in January, dragged down by weakness in the eurozone economy and challenges facing banks from ultralow interest rates and regulatory pressures.

But Deutsche Bank has taken a bigger battering because it is also entangled in a web of legal woes. Its share price has plunged by a third since the beginning of the year.

The bank faces a quagmire of as many as 6,000 different litigation cases, the provisions for which helped push it to a record loss of 6.8 billion euros last year.

It was fined last May a record $2.5 billion for its involvement in rigging interest rates, and has faced probes by Swiss authorities for suspected price fixing on the precious metals market.

US investigators have also looked into its Moscow branch on suspicion of possible involvement in money-laundering.

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