Deutsche Bank AG, Europe’s biggest bank, said trades linked to benchmark rates were legal after the Wall Street Journal reported it made a profit of at least 500 million euros ($654 million) from the transactions in 2008.
Frankfurt-based Deutsche Bank “diversified and lowered the bank’s portfolio risk” during the financial crisis, just like many investors, it said in an e-mailed statement today.
Global authorities are investigating claims that more than a dozen banks including Deutsche Bank rigged submissions used to set benchmarks such as the London interbank offered rate to profit from bets on interest-rate derivatives or make their finances appear healthier. UBS AG, Switzerland’s biggest bank, reached a $1.5 billion settlement for manipulation of interest rates and criminal charges against two former traders in December.
The strategy “was based on a market view about the likely direction of interest rates and not on any belief that the bank could inappropriately influence interbank lending rates,” according to the statement.
Deutsche Bank made the profit in 2008 from billions of euros in bets related to Libor and other global benchmark rates, the WSJ reported today, citing internal bank documents.
Christian Streckert, a spokesman for Deutsche Bank, declined to comment on the size of any gains the firm made from the trades in a telephone interview.
The company climbed 0.8 percent to 36.96 at 10:16 a.m. in Frankfurt trading, matching an advance for Europe’s benchmark Stoxx 600 Banks Index. The share climbed 13 percent this year, valuing the bank at 34.6 billion euros.
“Deutsche Bank is the market leader in the rates business and they make substantial amounts,” Christopher Wheeler, an analyst with London-based Mediobanca SpA, who recommends clients sell the shares, said by telephone. “But it is not clear whether any of that money was made through any kind of involvement in Libor rigging.”
Royal Bank of Scotland Group Plc is in settlement negotiations with regulators over manipulation of Libor, people with knowledge of the matter said last month. Former traders at Deutsche Bank, Credit Agricole SA and HSBC Holdings Plc are also under investigation, according to one person who asked not to be identified because the probes are continuing.