Deutsche Bank AG’s (USA) (NYSE:DB) ongoing crisis has worried all types of investors. The investors are worried that the huge $14 billion settlement offer presented by US Department of Justice can ruin the bank if it is not able to bargain a lesser settlement term for itself.
Qatari royal family is right now the largest shareholder of the German bank and the bank needs to show them some hope. In July this year, the royal family increased its stake to 10% and also chose one of its board members. The family currently supports the current management and is expecting things to get better after the restructuring plan of CEO John Cryan is fully implemented.
They are concerned about the massive fines on the bank and about whether the management is sticking to its long-term strategy. The support of Qataris can be crucial for the bank in the next few years, especially when it goes to raise more equity. German Chancellor, Angela Merkel has almost ruled out any aid for the bank in this time of crisis. Hence, the pressure on it has increased substantially.
The weak profitability of the bank has been a big reason due to which it is expected that it will not be able to meet the regulatory minimum capital requirement by 2019. The heavy litigation and restructuring charges are not allowing it to breathe in today’s competitive environment. The bank has explicitly told the US regulator that it won’t pay that much money and many analysts also expect it to do the same.
The bank will be going back to the US Justice Department again some time to remove the case of Russian equity trading due to which it might decide to go smoothly this time. The bank is also on a mission to cut its non-core assets and its extra costs so that the profitability can be increased. The regulatory requirement has tied a lot of its capital, and low-interest rate environment is also giving it a tough time.