Deutsche Bank shares have risen after Angela Merkel suggested it may be too big to fail after all
Shares in Deutsche Bank rose as the market opened today, as investors reacted to a u-turn by the German Chancellor over a potential bailout of the lender.
Shares had spent most of this week falling after Angela Merkel suggested the struggling bank would not receive state assistance, saying that although it faced a $14bn (£10.8bn) fine from the US Department of Justice, a bailout was "not on the agenda".
But yesterday Merkel railed back on those comments, saying Deutsche is "part of the German banking and financial sector".
Of course we hope that all companies, also if they face temporary problems, can develop in the right direction.
Those comments, made at a press conference yesterday afternoon, sent shares up 3.5 per cent to €10.89 in early trading.
Is Deutsche really too big to fail?
Deutsche's shares have had a rough ride in 2016 – in fact, they have fallen more than 30 per cent in the last three weeks. But analysts are divided over whether the German government would allow the lender to fail.
Neil Wilson, analyst at ETX Capital, told Morning Wire yesterday that it was unlikely the German government would let it go under.
"There would have to be a backstop along the way and, in good European tradition, they'll be a fudge found to sort it, I'm sure."
However, others have compared Deutsche to another ill-fated lender, with CMC Markets' Jasper Lawler pointing out:
There is a fear that Deutsche Bank is setting up as Europe’s Lehman Brothers moment. US banks have been taking advantage of the difficulties in the European banking sector by taking market share but trouble at a multinational with a big presence in US capital markets like Deutsche Bank carries huge counterparty risk.
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