Deutsche Bank CEO insists financial strength is ‘beyond doubt’ despite rating downgrade

Finance news

The new chief executive of Germany’s flagship lender has conceded the bank faces an uphill battle against a barrage of bad “newsflow.”

Deutsche Bank’s long-running turmoil was dealt a fresh blow Thursday, when share prices tumbled after it was reported that the Federal Reserve labeled the bank’s U.S. business as being in a “troubled condition.”

Less than 24 hours later, influential group Standard & Poor’s slashed its credit rating, potentially raising the cost of its borrowing. The ratings agency also questioned whether Deutsche Bank’s CEO Christian Sewing would be able to return the bank to profit.

“Let’s be straightforward: the newsflow is not good… I know that the current newsflow must give you the feeling that the bank is not getting any respite. That’s why I think it’s important for me to put this news in perspective,” Sewing said in a letter to staff Friday.

“At group level, our financial strength is beyond doubt,” he added.

Citing sources familiar with the matter, the Wall Street Journal reported Thursday that the Federal Reserve had downgraded Deutsche Bank’s U.S. business to one of the lowest possible designations last year.

Meanwhile, the Financial Times also reported Thursday, citing a source, that Deutsche Bank’s U.S. subsidiary was added to the Federal Deposit Insurance Corporation’s list of “problem banks,” or those with weaknesses that threaten their financial survival.

The news prompted shares of Deutsche Bank to collapse to their lowest-ever closing level Thursday.

Nonetheless, in in his letter to staff Friday, Sewing insisted that credit and market risk levels had rarely been so low, speculation it was exposed to Italian turmoil was unfounded and funding plans for 2018 were progressing at a steady pace.

“Let’s face it, this is a situation where we are — if you look at our share price yesterday — vulnerable to speculation,” Deutsche Bank’s chief spokesperson, Joerg Eigendorf, told CNBC’s “Squawk Box Europe” Friday.

“The management has a plan, the management is executing on their plan and I can promise you there is no lack of determination,” he added.

Shares of Deutsche Bank traded around 1.5 percent higher during mid-morning deals Friday.

— CNBC’s Evelyn Chang contributed to this report.

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