Deutsche Bank chief says €18m Wirecard loss shows value of its risk management

Deutsche Bank chief executive Christian Sewing has said that the relatively small loss the bank suffered in Wirecard’s collapse offers some vindication of its risk management, as a parliamentary inquiry turned its spotlight on to the ties between the payment provider and lenders.

Germany’s biggest bank had exposure of €80m to Wirecard as part of a bigger syndicated loan to the group, but because of a hedging strategy kept its loss to €18m when the payments company filed for insolvency last June.

“While [such a] loss does hurt, it shows that our fundamental strategy is partly right,” Mr Sewing told MPs at a hearing in Berlin that ran into Friday morning. However, he added that one of the lessons from the Wirecard scandal was to become “still more attentive” to risks.

By contrast, Commerzbank, which had a €200m exposure in the same syndicated loan, suffered a loss of €175m.

With Wirecard’s accounting scandal shaking Germany’s financial and political establishment, the inquiry has this week sought to examine how and why the disgraced company received support from the country’s biggest banks.

Deutsche Bank was among lenders that helped Wirecard sell a €500m bond to investors in September 2019, less than a year before the payments group failed.

Asked about its role in the sale, Mr Sewing told MPs the bank had drawn on documents from external parties such as auditors and rating agencies that were “usually reliable”.

Later in 2019, Deutsche pulled out of a €150m margin loan to Wirecard’s chief executive Markus Braun, as the bank grew increasingly nervous about the value of the shares he had pledged as collateral. Mr Braun, who denies prosecutors’ accusations that he ran an elaborate fraud at Wirecard, tried to persuade the bank to reconsider in a phone call with Mr Sewing.

The Deutsche chief executive admitted the scandal had “put Germany as a financial centre into a bad light” and urged lawmakers to “do everything to make sure that something like this does not happen again”.

Although Deutsche Bank limited its exposure from the Wirecard loan, DWS, the bank’s asset management division, incurred €600m of losses when the Wirecard shares its fund held plunged. Mr Sewing told MPs that investment decisions at DWS were taken independently and that Deutsche Bank had no sway over them.

In testimony that lasted three hours, Mr Sewing disclosed that Mr Braun had approached him in 2018 to discuss “potential co-operations in various business areas”.

According to Mr Sewing, in a further meeting in February 2019, also attended by Deutsche chairman Paul Achleitner, Mr Braun “told us that Deutsche Bank should turn into a technology group with an attached bank but was unable to elaborate which role the bank should have played in such a scenario”.

The “vague” talks came to nothing, Mr Sewing said, and at no point was a potential merger of the groups discussed.

Mr Sewing added that he only learnt about “Project Panther”, Mr Braun’s ambition to take over Deutsche, from media reports following Wirecard’s collapse.

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