Deutsche Bank shares finally climb after falling to a historic low as fears for Germany's top bank wipes billions off the FTSE 100 after Merkel rules out rescue 

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Deutsche Bank shares have finally climbed today after falling to a historic low amid mounting fears for the future of Germany's top bank.

Companies in the FTSE 100 index saw £23billion wiped off their value yesterday as investors dumped financial stocks.

The sell-off was triggered by reports that German Chancellor Angela Merkel had ruled out a government rescue of troubled lender Deutsche Bank.

The bank has lost more than half its value in the past year as it struggles to cope with low interest rates and sluggish growth.

Deutsche Bank shares fell another 7.5 per cent to a record low yesterday, dragging other finance stocks down with it. 

This morning they fell to €10.25 amid warnings that a dip below €10 per share would take the bank into the realm of a risky investment. However, by this afternoon, shares had risen to €10.63 before the market closed at €10.51 - down 0.4%. 

The FTSE 100 Index was down 10.37 points to 6,807.67, as London-listed lenders were dragged lower by the negative sentiment surrounding the German bank.

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Deustche Bank has lost more than half its value in the past year as it struggles to cope with low interest rates and sluggish growth

Britain's top banks shed £4billion, with Royal Bank of Scotland  and Barclays dropping 2.9p to 174.6p and 2.2p to 165.9p respectively in London.

In the US, Wall Street was set to open higher for the first time in three days having closed lower in volatile trading on Monday.

The Dow Jones industrial average gained 72 points, or 0.4%, to 18,167 as of 10.15am Eastern time.

There is mounting concern Deutsche is struggling under the weight of a £35trillion portfolio of complex, high-risk derivative trades – and that its collapse could bring the financial system crashing down.

The bank is so closely entwined with other lenders that a failure might trigger a wider economic collapse across Europe, according to the International Monetary Fund.

US authorities shocked markets last week by slapping Deutsche with a £10.8billion bill over the sale of toxic bundles of mortgage debt during the financial crisis. The lender insists it will not have to pay the full amount, and the final figure is subject to further negotiations.

But the proposal unnerved investors, particularly given the bank is worth just £12.7billion in total.

Yesterday’s sell-off was sparked by a report in a German magazine that Mrs Merkel had categorically ruled out a bailout.

Government officials said she had made her views clear to Deutsche Bank’s Yorkshire-born chief executive John Cryan, according to the report. Shares dropped 7.3 per cent on the news, hitting their lowest level in a quarter of a century.

CAN GRUMPY BRITISH BOSS AVERT CRASH? 

John Cryan, Deutsche’s 55-year-old chief executive, has the pale skin of a workaholic

All hopes for steering Deutsche Bank to safety rest on the shoulders of a keen-eyed and straight-talking Yorkshireman known as Mr Grumpy.

John Cryan, Deutsche’s 55-year-old chief executive, has the pale skin of a workaholic and someone who spends hours jetting between offices in Europe, the US and Asia. Nicknamed Mr Grumpy by British investment bankers, partly due to his usually furrowed brow, he is regarded as a brilliant analyst.

His father, a musician at the legendary Ronnie Scott’s club, died while he was a student. So when Cryan graduated he needed to earn some money and, though he considered jazz, he opted for a career in banking.

Married to Mary, who he met at work, he lives in London and has no children. Despite a £2million salary, Cryan professes to live simply, taking the Tube to work. His one extravagance is a riverside mansion which he is renovating in Maryland, USA, where his wife is from.

He earned his reputation as a straight-talker with a keen analytical eye in 2007 when, at UBS, he told RBS boss Fred Goodwin he was overpaying for Dutch bank ABN Amro.

Fred the Shred ploughed on regardless and was hounded out of banking. UBS, led by Cryan, survived the financial crisis.

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Michael Hewson, of financial firm CMC Markets UK, said: ‘While one can understand the reticence of German politicians to bail out yet another bank, particularly in the lead up to an election, one has to question the wisdom of articulating that reluctance out loud when markets are already nervous.’ 

CMC warned that a dip under €10 per share would take the bank into the realm of a risky investment.

Its shares were trading at €10.52 last night.

But vulture investors are betting the bank’s share price will drop further. Around 3.07 per cent of Deutsche shares are being short-sold, meaning their holders make money if the value goes down. 

German Chancellor Angela Merkel had ruled out a government rescue of the troubled bank

This is up from 1.72 per cent over the past week, according to data from financial information firm Markit.

Chris Beauchamp, chief market analyst at city trader IG, said: ‘The new week has started with a bang, as the parlous state of Deutsche Bank explodes on to everyone’s radar once again.

‘The bank has been limping along for months, but reports that Angela Merkel may not rescue it have sent shares tumbling, dragging banks across the UK and Europe lower.’

Mr Cryan sought to shore up confidence by insisting a bailout would not be needed. The bank said he had not asked Mrs Merkel for support and did not intend to.

A spokesman added: ‘At no point has John Cryan asked Chancellor Merkel to intervene in the residential mortgage-backed security issue with the US Department of Justice. 

Deutsche Bank shares fell another 7.5 per cent to a record low yesterday, dragging other finance stocks down with it

This question is not on our agenda: Deutsche Bank is determined to meet the challenges on its own.’ But although he does not intend to turn to the taxpayers for support, Mr Cryan is under no illusions about the task ahead.

Deutsche lost £5.9billion last year, and a US arm of the bank failed a Federal Reserve stress test for the second year running due to weaknesses in its balance sheet.

The collapse of the bank would pile further pressure on Mrs Merkel, who faces stiff opposition at home over her ill-fated refugee policy.

A bank failure or state bailout would shatter the reputation for economic competence she built up during a decade as Chancellor.

There are even fears a disorderly collapse might trigger an investor panic and economic crisis which could destabilise the EU, potentially bringing down the Euro.