Deutsche Bank (DB) - Get Report shares slumped to a fresh record low Monday as pressure continues to mount on the region's biggest lender amid calls to increase its capital buffer and record low interest rates in the struggling European economy.
Benchmark 10-year German bunds hit a new all-time low of -0.216% in mid-morning Monday trade, following similar moves for risk-free government debt around the world as data continues to suggest that the prolonged U.S.-China trade spat could trigger a global recession. Those concerns, as well as a more pronounced slowdown in Germany over the first three months of this year, pushed the country's Financial Stability Board to have domestic lenders set aside nearly $6 billion in extra cash, starting this summer, as a precaution against further risks.
The concerns have added a new dimension to this Thursday's European Central Bank meeting in the Lithuanian capital of Vilnius, one of the final interest rate decisions under the seven year tenure of President Mario Draghi, with investors now pricing in the possibility of fresh monetary stimulus or, at the very least, a longer-term projection for ultra-low and negative interest rates, both of which hurt commercial bank profitability.
"The ECB has turned off cruise control and is back to good old data-dependence. Knowing that actually there is not a lot it can do to really kick-start growth if needed, the ECB will stick to its current easing bias, adding a dovish comment here and an easing element there," said ING's chief German economist Carsten Brzeski. "New pressure from financial markets has increased the probability that the ECB will reveal (some) details of the new TLTROs this week. Under pressure or not, the ECB will do everything it can to keep the "whatever it takes" spirit alive."
Deutsche Bank shares were marked 1.66% lower in afternoon trading in Frankfurt Monday to change hands at €5.94 each, after hitting an all-time low of €5.80 that extended the stock's 52-week decline to just under 49%.
Last month, Deutsche Bank CEO Christian Sewing vowed t make "tough cutbacks" at the struggling lender during a speech to investors at the bank's annual general meeting in Frankfurt.
Germany's biggest bank has been beset by myriad headline risks ranging from a failed merger attempt with rival Commerzbank AG (CRZBY) , last year's warning from U.S. regulators regarding its risk management practices, a string of losses from its trading division and the planned exit of major shareholder HNA Group.
It's also embroiled in a political tug-of-way between President Donald Trump and Democratic lawmakers in the House and Senate over his dealings with the bank and the possible connection to Russian interests leading up to the 2016 Presidential elections.
The Deutsche Kreditwirtschaft, a German banking lobby group, warned last week that the new capital measures come at "an inopportune time and is met with incomprehension in the German banking industry."
"German banks have increased their capital resources following the financial crisis as a result of the stricter regulations and are significantly more stable than before," the lobby group said.