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Why Shares of Deutsche Bank AG Jumped 14% Today

By Jordan Wathen – Sep 30, 2016 at 4:25PM

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Shares of the global bank are rising on reports that it may pay less to settle with the DOJ than originally feared.

Photo by: Flickr user Björn Láczay.

What's happening?

Shares of Deutsche Bank AG (DB 1.25%) are on the move on Friday, rising by about 14% as of 3:45 p.m. EDT.

So what

Deutsche Bank shares rose after the bank's CEO, John Cryan, wrote a message to the bank's employees to address reports that a handful of the company's hedge-fund clients had reduced the amount of business they do with the bank. Cryan noted that the report should be considered "in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients."

Further helping the stock were reports that the bank may settle with the U.S. Department of Justice for as little as $5.4 billion, significantly less than the $14 billion originally suggested by the DOJ. Deutsche Bank has yet to confirm the actual figures.

Now what

Any billion-dollar settlement with the DOJ is significant as a percentage of the company's market cap. The current share price imputes a market value for the bank of just under $18 billion. 

Earlier in the week, analysts worried that the settlement could force Deutsche Bank to raise capital, presumably with dilutive stock issuance. For now, though, markets seem pleased that a settlement with the DOJ may cost less than originally feared, potentially allowing the bank to avoid dilutive capital raises.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Deutsche Bank Stock Quote
Deutsche Bank
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