Deutsche Bank AG (USE) (DB) Stock Gets a Shot in the Arm from PIMCO

Advertisement

Beleaguered Deutsche Bank AG (USA) (NYSE:DB) has so unnerved the market that its borrowing costs are now among the highest in Europe, but at least DB got a vote of confidence from one of the largest asset managers on the planet.

Deutsche Bank AG (USE) (DB) Stock Gets a Shot in the Arm from PIMCOIndeed, it looks like Bill Gross’s old firm made a significant bet on DB debt. From Reuters:

“Pacific Investment Management Co, which oversees more than $1.5 trillion in assets under management, took part in Tuesday’s $1.5 billion Deutsche Bank AG bond offering as well as a $3 billion bond deal on Friday, a source familiar with the matter told Reuters on Wednesday.”

Investors have actually been pretty quick to loan Deutsche Bank money through the bond market. After all, it raised $4.5 billion over two days. But having a big-name asset manager like Pimco attached to the name certainly helps with the optics.

The appetite for Deutsche Bank bonds indicates some confidence on the part of investors that the firm is moving past its problems. Already under pressure, Germany’s biggest lender has been reeling ever since the Justice Department asked for $14 billion to settle an investigation into dodgy securities related to the financial crisis.

DB Stock: Still Kicking

Demand for the attractively priced bonds lend weight to the view that the DoJ will settle for less … at least one would hope. A $14 billion settlement might be beyond punitive. The entire company has a market capitalization of less than $19 billion.

To offer some perspective, Citigroup Inc (NYSE:C) and Deutsche Bank have roughly the same amount of assets. Citi coughed up a total of $18 billion in various settlements, true, but it had a market cap of well more than $100 billion as it did.

As much as DB must pay for its scandalous behavior, the DoJ shouldn’t take a position to forces it to collapse. How does that serve the health of the global financial system?

It’s hard to like DB stock under such conditions. Bank stocks, once lamed, take forever to get back on track. However, the odds of the bank going under look to be getting smaller by the day.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/deutsche-bank-ag-use-db-stock-pimco/.

©2024 InvestorPlace Media, LLC