Deutsche Bank stock hits record low on funding fears

The largest lender in Germany, Deutsche Bank (LSE: 0H7D.L - news) , saw its share price hit a record low on Monday after it was forced to deny talk surrounding state aid.

The bank, which has lost more than half its market value this year amid a sea of pressures, lost a further 7% following a Focus magazine report which claimed the German government had ruled out financial help as the bank aims to settle a costly issue with US regulators.

Deutsche is facing a possible $14bn (£10.8bn) payout relating to sale of mortgage-backed securities before the financial crisis.

It is currently locked in negotiations on the terms and signalled it would not agree a $14bn sum.

Investors fear any move to raise additional funding, to help pay any settlement, as it would dilute the value of their holdings.

The bank insisted on Monday that a capital increase was "currently not on the agenda" and it denied it had asked the German government to intervene with the US on its behalf - along with any suggestion it had sought a bailout.

"The question is not on our agenda," the bank said in its statement. "Deutsche Bank is determined to meet its challenges on its own."

Those challenges include not only the prospect of the US mortgage product penalty but its recovery from previous legacy costs arising from the financial crisis.

Chief (Taiwan OTC: 3345.TWO - news) executive John Cryan has embarked on a painful cost-cutting and restructuring drive in a bid to restore profitability but the low interest rate environment - a result of the economic slowdown - has squeezed its earnings.

Chief market analyst at CMC Markets (LSE: CMCX.L - news) , Michael Hewson, wrote in a client note: "Weekend reports that German Chancellor Angela Merkel had ruled out the prospect of any form of state aid in the event that Deutsche Bank's problems become more acute have hit the share price hard.

"While the eventual fine may not be anywhere near that much ($14bn), the litany of legal problems has raised concerns about the health of one of Europe's largest lenders and any contagion effect to the rest of Europe's sickly banking sector."

Europe's banking stocks were not immune from Deutsche's pain.

In London, part-nationalised banks Lloyds Banking Group (Other OTC: LLOBF - news) lost 3% while RBS (LSE: RBS.L - news) was almost 3% lower.

The wider FTSE 100 closed 1.3% lower at 6818 as investors took profits following a strong close to values last week.