Deutsche Bank works on Wirecard Bank bailout

Deutsche Bank is working with German regulators on a potential bailout of Wirecard Bank, the deposit-taking unit of the payments group at the centre of one of the country’s biggest postwar accounting frauds.

Wirecard Bank, which by the end of 2019 had €1.9bn in total assets, is based in a Munich suburb and is not part of its parent group’s insolvency proceedings, which were triggered last week after the company said cash was missing and its biggest business had been misrepresented.

Deutsche said in a statement on Thursday that it was “currently reviewing the possibility of providing Wirecard Bank AG with financial support”, adding that this was happening in co-ordination with Germany’s financial watchdog BaFin, the administrator of the collapsed group and the lending unit’s management. 

“We are in principle prepared to provide this support in the context of a continuation of business operations, if such assistance should become necessary,” Germany’s largest lender said, declining to comment further. Deutsche neither disclosed how much money it might provide nor how the bailout could be structured.

Deutsche is in the middle of its own restructuring that was kicked off a year ago and includes the cutting of 18,000 jobs and a drastic reduction of its investment banking activities.

The Frankfurt-based lender has been lossmaking since 2014 and warned investors in April that its goal to break even on a pre-tax basis this year had become more difficult to achieve because of the economic repercussions of Covid-19.

BaFin confirmed that talks over the future of Wirecard Bank are taking place, adding that the regulator welcomed “any kind of support” for the lender, which is part of the deposit insurance scheme for Germany’s private banks. 

Wirecard’s administrator, Munich-based lawyer Michael Jaffé, declined to comment. Mr Jaffé said on Tuesday that “numerous” companies had expressed interest in buying parts of Wirecard. Wirecard declined to comment.

BaFin last week sought to ringfence Wirecard Bank, the lender that the payments group has owned for more than a decade and holds most of its licences with credit card companies such as Visa and Mastercard. 

The watchdog installed a special representative in the bank’s headquarters to monitor management decisions and imposed a partial payments ban to prevent the lender transferring certain assets to Wirecard. Wirecard Bank by the end of 2019 reported a healthy capital ratio of 21 per cent common equity to assets.

After the lender’s owner Wirecard AG collapsed into insolvency last Thursday, BaFin was considering freezing assets at the bank but concluded that the lender’s situation was not bad enough to justify such a move, a person with first-hand knowledge of the matter told the Financial Times. 

Deutsche has a history of bailing out struggling German rivals. Over the past decade, it acquired Postbank and Sal. Oppenheim, two lenders that ran into existential trouble and that later caused Deutsche a lot of headaches. 

Bloomberg first reported about Deutsche’s willingness to provide financial support for Wirecard Bank.