Deutsche Bank squeezes past crucial health checks but concerns remain

Investor concerns over Deutsche Bank were put to one side on Monday as the embattled German lender performed better-than-expected in the European Central Bank‘s (ECB) latest stress tests. However, longer term concerns remain.

Deutsche shares climbed a modest 0.2 percent in early deals after it registered a core tier 1 capital ratio of 8.14 percent at Friday evening’s test. This figure is essentially the cash buffer it has in the event of a financial crisis

The assessment looked at the bank’s 2017 balance sheet and tested how it would stand up to the strain of what the ECB described as “adverse market developments.”

In 2016, Deutsche Bank saw its ratio drop to 7.8 percent, ranking it as one of the lowest in the health check. However, the 2018 results still placed the German lender at 40th place out of the 48 lenders tested and analysts have warned that the progress shown may not be enough.

“The problem in the euro zone is a dearth of bank lending,” consultancy High Frequency Economics said in its weekly research note Monday.

“(The) stress tests, published on Friday, show some progress toward bank recapitalization, although not enough to prevent some of the strongest banks in Europe from flirting with mandatory recap (recapitalization) levels in the adverse scenario,” the firm said.


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