Cerberus’s big bet on Germany’s Deutsche Bank has fallen by more than 50 percent since the U.S. firm became Deutsche Bank’s single-biggest shareholder a year ago.
The German bank’s shares have fallen 56 percent this year — and nearly 80 percent over the past five years. Prior to the financial crisis, in the spring of 2007, the bank’s U.S. shares traded as high as $152. The shares closed on Wednesday at $9.03.
Cerberus took a 3 percent stake in Deutsche Bank last November, and at the end of the third quarter, that stake accounted for 53 percent of Feinberg’s public equity portfolio, with the shares valued at that time at $707.5 million, according to a13F Securities and Exchange Commission filing by Stephen Feinberg, Cerberus co-founder and co-CEO.
To be sure, that’s a tiny portion of the $35 billion firm, which is more focused on private equity than hedge funds and has a relatively small public equities portfolio.
Other big U.S. investors in Deutsche Bank include Vanguard, Goldman Sachs and JP Morgan.
Cerberus declined to comment, but an individual close to the firm said it considers Deutsche Bank a long-term investment that is in the midst of a restructuring.
One bright point is that German officials have been discussing how to facilitate a merger of Deutsche Bank and Commerzbank, Germany’s second largest bank, as a way to bolster its fortunes, Bloomberg reported Wednesday. A potential merger has been discussed before, but has yet to materialize.
Cerberus also has a 5 percent stake in Commerzbank. Deutsche Bank’s stock jumped 8.4 percent Wednesday after the news broke.
The renewed merger talk comes after Deutsche Bank shares took another dive in late November when the bank was hit with a new money laundering scandal. Six of the bank’s offices in and near its Frankfurt headquarters were raided by police on allegations of money laundering linked to the Panama Papers.
This week, German public broadcaster Hessischer Rundfunk reported that Frankfurt prosecutors are investigating a former anti-money laundering official of Deutsche Bank for failure to report suspicious transactions, as required by law, according to a report in Reuters. Prosecutors previously said they were probing two unnamed Deutsche Bank employees believed to have helped clients set up offshore firms to launder money. The inquiries are focused on events from 2013 through 2018, according to a Deutsche Bank statement.
The Panama Papers-linked money laundering is not the first time Deutsche Bank has been accused of such financial crimes. Last year it paid a $425 million fine to New York regulators to settle charges that it had helped launder $10 billion in Russian money through its branches in Moscow, London, and New York.
In July of this year Deutsche hired a unit of Cerberus as an advisor to help it with a turnaround by cutting costs following three years of losses. Cerberus President Matt Zames, a former chief operating officer of JPMorgan Chase, is leading the advisory team working with Deutsche Bank.
