On Wednesday, shares in Deutsche Bank fell to a new record low as the criminal investigation into the suspected money laundering activities of the bank’s wealth management unit continued. Then, on Thursday, the share price dropped even further following revelations that Deutsche Bank may have processed an additional €31bn of questionable funds in the Danske Bank money-laundering scandal. With the share price value at less than half of what it was a year ago, Deutsche Bank continues to struggle and any turnaround seems as elusive as ever.
Last week, two raids by the German authorities on the lender’s Frankfurt headquarters sent its price to a then new all-time low. More than 170 police officers, prosecutors and tax inspectors searched for evidence on a unit that was part of the bank’s Global Trust Solutions business, based in the British Virgin Islands. The unit, dubbed Regula Limited, was named in the 2016 “Panama Papers” leak, where it was exposed to have operated trusts for about 900 clients with assets of around €311m. With only a fraction of the clients located in Germany, German authorities suspect that, between 2013 and 2018, the bank helped clients transfer suspicious funds into an offshore Deutsche Bank vehicle without flagging up potential money laundering to law enforcement authorities. With the investigation threatening to drag on for many months, investors are concerned that Christian Sewing, the bank’s new chief executive, will be distracted from his turnaround agenda.
Separately, however equally as troubling for the investors, the Financial Times revealed on Thursday that Deutsche Bank may have processed an additional €31bn in addition to the €150bn it cleared for Danske Bank’s Estonian branch between 2007 and 2015. This brings Deutsche’s contribution to over four fifths of the €200bn that Danske has identified so far as passing through its Estonian branch. In what is shaping up to be one of Europe’s largest ever money laundering cases, banks such as JPMorgan Chase & Co. and Bank of America Corp. are also involved, however, as their relationship with Danske lasted shorter, the German lender could face the most exposure. Deutsche has said that is only processed payments for Danske but severed ties after identifying suspicious transactions.
This week has dealt a fresh blow to Christian Sewing, the new chief executive, who has been trying to stabilise the bank after three years of losses under previous management. This year, Deutsche shares have halved and the bank is now valued at €16.7bn. Since his appointment, Sewing has attempted to make a clean break from previous leadership, avoiding risky investment banking deals and spiralling compensation at all costs. Nevertheless, further decline this week, amid a wider fall in the European banking sector spells increasing difficulty for Mr Sewing.