A raid of Deutsche Bank AG’s Frankfurt offices Tuesday is part of a crackdown on a long-controversial trading strategy that helps investors claim credit for taxes they never paid, people with knowledge of the matter said.
The lender’s stock dropped the most in more than two weeks as prosecutors in Frankfurt confirmed a search was conducted. No bank employees have been accused of wrongdoing, Christian Streckert, a company spokesman, said by phone.
The tax-evasion probe focuses on so-called cum-ex transactions, said the people familiar with the situation, who asked not to be identified because the inquiries are private. Such trades use loopholes in rules that allow a short-seller and actual holders of shares to both claim tax credits on a dividend that was only paid once.
The investigation adds to legal woes that already have eroded Deutsche Bank’s earnings and distracted senior executives amid investor demands that they overhaul the firm to improve profitability. Prosecutors in Frankfurt, Cologne and Munich have been investigating clients of several banks over the trading strategy. There are cases pending at Germany’s top tax court, which has yet to rule whether transactions were illegal.
The raid comes after co-Chief Executive Officers Anshu Jain and Juergen Fitschen said on Sunday they would step down early, so that a successor, John Cryan, can oversee the company’s overhaul in coming years. Cryan takes sole charge of Germany’s largest bank next May.
Deutsche Bank was down 2.5 percent at 27.88 euros at 5:35 p.m. in Frankfurt, paring this year’s gain to about 12 percent. The raid was reported earlier Tuesday by Germany’s Bild Zeitung.
“More negative headlines are not helping Deutsche Bank’s image,” said Andreas Plaesier, an analyst with M.M. Warburg in Hamburg who recommends investors hold the shares. Still, “these transactions have been investigated by tax authorities for a while and the probes also involve other companies. The significance for Deutsche Bank shouldn’t be overestimated.”
In April, Deutsche Bank was ordered to pay a record $2.5 billion fine and fire seven employees to settle U.S. and U.K. investigations into its role in rigging the London interbank offered rate. The penalty came on top of 7.1 billion euros ($8 billion) it spent on litigation in the previous three years.
The firm’s outstanding legal challenges include probes into the rigging of benchmark foreign-exchange rates, as well as investigations into mortgage- and asset-backed securities dealings and compliance with U.S. sanctions.
Fitschen is also on trial with other former Deutsche Bank CEOs on attempted-fraud charges. The men are accused of participating in a plot that included submitting false testimony and inaccurate legal documents in response to a multi billion-euro lawsuit filed by the late media entrepreneur Leo Kirch and his heirs.
Jain will leave Deutsche Bank at the end of June, while Fitschen will step down next year.