Deutsche Bank buying back over $5bn of its own debt

Deutsche Bank announced that it will be buying back over $5bn (£3.5bn) of its own debt.

The German banking giant said that it will be buying €3bn (£2.3bn) of euro-denominated senior unsecured debt securities and $2bn of dollar-denominated ones.

According to Deutsche Bank, the tender offer is expected to be open for seven business days for the EUR denominated securities, and 20 business days for the USD denominated securities, subject to lower pricing for bonds tendered after day 10.

The EUR tender offer encompasses the following securities: DE000DB7XHM0, DE000DB7XJB9, DE000DB7XJC7, DE000DB5DCS4, DE000DB7XJP9

The USD tender offer encompasses the following securities: US25152R2U64, US25152R2X04, US25152R2Y86, US25152RVS92, US25152RXA66, US25152RYD96, US25152RWY51, US25152CMN38

Rumours of Deutsche Bank buying back its debt sent shares in the company surging on Wednesday. Confirmation by the bank on Thursday sent stock up further, closing up 1.61 points (or 11.80%) to 15.30EUR.

Deutsche Bank

“The bank’s strong liquidity position allows it to repurchase these securities without any corresponding change to its 2016 funding plan,” Deutsche Bank said.

Marcus Schenck, Deutsche Bank Chief Financial Officer, sent out the following message to the Bank’s employees on February 12, 2016

“The Bank is taking advantage of market conditions to repurchase this debt, lowering its debt burden at attractive prices. By repurchasing this debt below its issue price, the Bank realises a profit. Deutsche Bank is also using its strong financial profile to provide liquidity to bond investors in challenging market conditions. At the end of 2015, the Bank had around EUR 215 billion in liquidity reserves and our liquidity coverage ratio, which measures a bank’s ability to meet short-term liquidity needs, was around 120%.



“Deutsche Bank is also making the most of a strong capital and risk position. Based on our published preliminary results, our Common Equity Tier 1 (CET1) ratio as at 1 January 2016 is 12.52% on a ‘phased-in’ basis – around 180 basis points, equivalent to around EUR 7 billion of Common Equity Tier 1 capital, higher than regulatory requirements for 2016. Levels of market risk are low by any historical measure and credit risk costs, at around 30 basis points of average loans in 2015, are below peers.”

A tool the bank can use to reduce panic

Roger Francis, an analyst at Mizuho International in London, was quoted by The Australian Financial Review as saying that Deutsche Bank can use the bond buyback as a tool to reduce panic.

Francis added: “It doesn’t really address the underlying concern that people have about the bank. They need earnings to pay dividends and subordinated bond coupons and that’s where the question marks are.”