Shares of embattled Deutsche Bank AG (NYSE/DB) plunged on Tuesday, June 9 after prosecutors raided the banking giant’s head offices in Frankfurt, Germany.
According to a company spokesperson, German authorities searched offices at Deutsche Bank headquarters and seized documents. However, the bank emphasized that the investigation is focused on transactions by clients and that no bank employees have been accused of wrongdoing. Shares of the European financial giant declined 2.61% to $31.31 during Tuesday’s trading following the announcement.
Investigation on Alleged “Cum-ex” Trades
The investigation is focused on a controversial tax-loophole called “Cum-ex” trading. The strategy allows participants to claim rebates on withholding tax payments without actually paying the taxes.
Across Europe, regulators are cracking down on the practice. Last year, British tax officials asked the London units of major international banks to provide information on such transactions. During the same period, Swiss authorities raided the offices of Bank J. Safra Sarasin AG.
For Deutsche Bank, the raids could not have come at a worse time. The company has been a target of several investigations, including the interest-rate rigging scandal in April of this year. The bank paid more than $2.5 billion and fired seven employees for the LIBOR rate violations.
Furthermore, Deutsche Bank’s co-chief executives have announced plans to step down. On Sunday, Anshu Jain announced that he planned to step down at the end of June; Jurgen Fitschen, the other co-CEO, said he plans to leave after the bank’s annual shareholder meeting next May.
Even though the police search on Tuesday did not appear to involve any wrongdoing by the bank, today’s events illustrate just how difficult it will be for management to put controversy behind them and focus on turning around the business.