'Troubled' Deutsche Bank backed by key investor after S&P downgrade

Deutsche Bank shares have lost more than 40 percent of their value since the beginning of the year.

Deutsche Bank's new CEO has moved to reassure staff that the bank is in good shape after a tough 24 hours for the troubled German lender.

The Fed is Deutsche Bank's main regulator in...

This comes after a ratings downgrade and a share price slide in the wake of a report saying the U.S. regulator viewed the lender as "troubled" past year.

It could be hard for a bank which has a business on the "troubled" list to pass the scenarios, said a person familiar with the tests who was not authorized to speak publicly.

Shares in the bank closed at an all-time low on Thursday as past misadventures in high-risk investment banking stymied the new chief executive Christian Sewing's attempt to refocus on its more staid corporate banking roots. That's exactly how I feel.

Deutsche Bank's new chief executive told employees today he was "sick and tired" of bad news surrounding the lender, after credit rating giant Standard & Poor's downgraded Deutsche's credit rating. The "troubled" designation is given to banks with a four or five rating.

Deutsche Bank's 1.75 billion euro contingent convertible (CoCo) bond DE107205454= with a 6 percent coupon saw its cash price hit a 15-month low of 89.735 cent on the euro on Thursday, translating to a yield of 9.24 percent.

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"Financially, the U.S. subsidiaries mentioned in the media are all very sound".

Sewing said a series of enforcement actions by the Federal Reserve were principally related to weaknesses in internal controls and infrastructure.

"Deutsche Bank intends to vigorously defend those charges". We take conduct matters extremely seriously and have cooperated fully with the ACCC during the investigation process. "The bank believes it and its staff acted responsibly and in a manner consistent with those rules".

The downgrade came after reports earlier in the week that the Fed past year designated one of Deutsche Bank's USA businesses as "troubled", something a person with knowledge of the matter confirmed to Reuters on Friday. The Financial Times also reported that the Federal Deposit Insurance Corporation added Deutsche Bank's United States subsidiary to its list of "problem banks".

"We see significant execution risks in the delivery of the updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time", S&P said.

But this is the first year the Fed will publicly release results of six foreign lenders, including Deutsche Bank, after requiring them to create consolidated US holding companies with ring-fenced capital.

Sewing emphasised the financial strength of Deutsche Bank's U.S. operations in his memo to staff and said: "The problems we face are not a question of financial soundness, but involve identified infrastructure and control deficiencies, which we are tackling".

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