Deutsche Bank boss pressed to say it’s ‘rock solid’ after shares tank

“Volatility in the fourth quarter impacted the earnings of most major banks, especially those in Europe, and clients may ask you about how the market-wide volatility is impacting Deutsche Bank”.

“We believe that Deutsche Bank has a capital shortfall of up to 7 billion euros, depending on the outcome of a range of litigation issues, which could necessitate a highly dilutive capital increase”, Citi analysts wrote in a note last week. Spooked investors also sold off shares in other banks, leaving Barclays (LSE: BARC.L – news) down 5.2pc, BNP Paribas (Xetra: 887771 – news) down 4.8pc and Italy’s Intesa Sanpaolo down 4.9pc.

John Cryan, the chief executive of Deutsche Bank, has come out publicly to claim the bank is “rock solid” following a dramatic drop in the troubled German giant’s share price. How do you think we should build a better Deutsche Bank? “This type of instrument has been the subject of recent market concern”, the chief executive said. On Monday, we took advantage of this strength to reassure the market of our capacity and commitment to pay coupons to investors who hold our Additional Tier 1 capital. We will nearly certainly have to add to our legal provisions this year but this is already accounted for in our financial plan.

The cost of buying protection to hedge against declining prices for these bonds has rocketed in the past week and the senior five-year euro credit default swap was trading at 242 basis points on Tuesday – its highest level since the end of the eurozone crisis in 2011. The weighted average maturity of its 144 billion euros of debt is six years.

“We do not worry too much about a possible takeover of Deutsche Bank“, Cryan said at the bank’s annual press conference in late January, adding that regulators would also likely frown at the combination of two large banks.

Anxieties that banks would not have the fiscal reserves to deal using commodities business or an important petroleum reneging on its debt payments were represented across most of the leading European indexes under special pressure in day trade in European stock markets with banking stocks and commodities companies.

In an effort to calm investors, Deutsche Bank said on Monday it had “sufficient” reserves to make due payments this year on AT1 securities. The estimated payment capacity for 2017 is about €4.3 billion, boosted in part by proceeds from the announced sale of a stake in Huaxia Bank Co., the Frankfurt-based lender said.