Deutsche Bank reassures the markets: buyback of 4,8 billion bonds

3 billion euro bonds, 2 billion dollar-denominated bonds. This is the amount of the buyback with which the leading bank in the Eurozone intends to reassure the markets worried that the institution would not be able to pay the coupons on the CoCo bonds - The announcement sent the stock flying (+11,39%), but Year-to-date losses still remain large.

Deutsche Bank sends a message to markets concerned about the strength of the largest bank in the Eurozone. After the rumors of recent days, the news was made official yesterday afternoon. The German institute will repurchase part of its senior debt for a value of just under 5 billion euros, out of a total of 50 billion outstanding.

After last year's record loss (6 billion euros) and doubts about fines from the authorities due to the bank's involvement in numerous scandals, the situation seemed to be getting worse from week to week. Yesterday the buyback announcement. The purpose is precisely to reassure international investors, alarmed by the possibility that Deutsche Bank failed to pay coupons on CoCo bonds, a particular type of subordinated bonds which represent the riskiest part of its debt, on which it is possible to suspend the coupon or carry out a conversion into shares in the event of a crisis.

The announcement, which arrived yesterday afternoon, gave new strength to the stock listed on the Frankfurt Stock Exchange. The shares finally closed trading with an increase of 11,39% to 15,36 euros, following the rally of the continental banking sector. Friday's rise allows the German institute to recover part of the losses accumulated since the beginning of the year (thereby dropping from 39,8 to 28,4%) due to panic selling on the entire European sector and fears relating to its high exposure financial.

“Does the bank's strong liquidity position – 215 billion euros – allow it to buy back these securities without any corresponding changes to its 2016 funding plan?, reads the note published by Deutsche Bank

The buyback covers up to €3 billion of euro-denominated bonds and €2 billion of dollar-denominated bonds. The expected duration will be 7 and 20 days respectively. We recall that, in recent years, the bank has issued a total of senior bonds for around 50 billion euro.

Thanks to the repurchase of its senior debt, Deutsche Bank should make a profit, as the bonds are currently trading at a lower price than the issue price.

To defend the first German bank, Finance Minister Wolfang Schauble took the field again yesterday, after accusing the markets of "exaggerating", reiterated that the bank "is strong and has sufficient capital".