Business News

Police raids were not the fault of Deutsche Bank management, CFO says

Key Points
  • Deutsche Bank offices were raided by German police last week.
  • Prosecutors said the probe related to evidence found in the Panama Papers.
  • Deutsche's CFO told CNBC Thursday that the current management was not to blame.
Investigation not connected to current management: Deutsche Bank CFO

Police raids on Deutsche Bank's offices in Frankfurt last week were not the fault of the current management team, according to the firm's chief financial officer (CFO).

Two Deutsche Bank staff members are suspected of helping clients set up off-shore businesses to launder money gained from criminal activity.

The wrongdoing is alleged to have continued through to 2018 but the bank's financial chief, James von Moltke, told CNBC's Annette Weisbach Thursday that current executives shouldn't shoulder the blame.

"To date, we are not aware of any wrongdoing on our part, so we will await the conclusion of the prosecutors," Von Moltke said.

James von Moltke, chief financial officer of Deutsche Bank AG, speaks during a fourth quarter results news conference in Frankfurt, Germany, on Friday, Feb. 2, 2018. 
Andreas Arnold | Bloomberg | Getty Images

Following the comments, Deutsche Bank shares pared losses slightly, but remained around 3 percent lower for the session amid a wider sell-off in global markets.

The public prosecutor's office in Frankfurt said an evaluation of data from the Panama Papers had triggered suspicion that the bank may have helped customers create offshore companies in tax havens around the world.

In 2016 alone, more than 900 customers with a business volume of 311 million euros ($353.6 million) were thought to have been cared for by a Deutsche Bank subsidiary based in the British Virgin Islands, the prosecutor said.

Von Moltke rejected the suggestion that Deutsche Bank's present board had been weakened by the raid, adding that the current management team had made "enormous efforts" to improve controls on its system to better understand clients.

Shares of the bank slipped heavily following news of the police action and the firm's corporate bond value also fell.

Investor reaction to negative news more severe than expected: Deutsche CFO

The CFO said capital markets had "struggled to get a sense of proportion" of the raid and that the affected business was a small division with revenues in the single-digit millions.

"It was (a) trust services business that in terms of revenues, customers and profits, was extremely small," he said.

Von Moltke said there had been a "very muted" response by clients to the raid and that liquidity remained strong. The CFO added that the bank was working hard to explain the situation.

"Raids that take place with reasonable frequency in Germany, aren't that well understood outside Germany," he said, before adding "our focus is on working with the prosecutors."

Since 2015, Deutsche Bank has endured a failed stress test in the U.S., several attempts to restructure, a leadership shake-up and a ratings downgrade.

Shares of the bank have tumbled over 50 percent this year, but Von Moltke said the bank's operating health was improving.

"We have been targeting to have the first profitable year in several years and we remain on track to achieve that."

CNBC's Sam Meredith contributed to this report.