Deutsche Bank Needs to Show Business Model Is Viable in Low Rate Environment, IMF Official Says

Deutsche Bank AG (DB) needs to demonstrate to investors that its business model is viable in a low rate environment amid concern about the lender’s financial resilience, Reuters reported on Wednesday, citing an IMF official.

“Deutsche Bank … is among banks that need to continue to adjust to convince investors that its business model is viable going forward and has addressed the issues of operational risk arising from litigation,” Peter Dattels, the IMF’s monetary and capital markets deputy director, said on Wednesday at a news conference, the news agency reported.

Dattels, who was speaking at a presentation of the IMF’s report on global financial stability, added that German authorities are closely monitoring Deutsche’s health and that the European financial system remains resilient.

The Washington-based fund said European banks need “urgent and comprehensive action” to address legacy non-performing loans and bloated, inefficient business models that threaten profitability. “Reducing nonperforming loans and addressing capital deficiencies at weak banks is a priority,” according to the report.

Deutsche Bank’s American depositary shares rose 1.1% on Wednesday in New York.

Shares have been under pressure since the US Department of Justice last month asked it to pay $14 billion to settle claims that it had missold US mortgage-backed securities before the financial crisis. The amount compares to the lender’s current market value of $18.3 billion.