Financial corporations – Deutsche Bank faces the exclusion of the Euro Stoxx 50 | new

Germany's largest bank lost more than 40% of its value this year after slipping into its third consecutive annual loss, replacing its chief executive and failing the first public resistance test of its American subsidiary. This places the bank in 61st place in the list of Stoxx index providers, the lowest rank among the current constituents. This means that he would automatically drop the index during the quarterly review of September 3, if a current non-index member was in the top 40. Currently, this applies to four companies.

"There is no chance that Deutsche Bank will survive the rebalancing of the index," said Uwe Streich, an analyst at Landesbank Baden-Württemberg in Stuttgart. "Only if the stock makes a huge amount, for example, in a merger or acquisition, the market capitalization might be high enough to stay in the index."

Speakers for Deutsche Bank and Stoxx did not want scenarios for an index exclusion Take a stand …

According to the latest Stoxx ranking, non-members Kering, Linde, UniCredit and Amadeus IT Group would automatically replace the current four members with the lowest market value during the September review. To stay in the index, Deutsche Bank is expected to beat French supplier Engie as a member of the weakest index – since March, however, it is lagging behind its market value. This would mean that the bank should account for nearly 7 billion euros in market value, which would mean a price increase of about 40%.

Exclusion would continue to weigh on prices

which are already at the bottom of the euro area benchmark this year. Passive investors would be forced to adjust their portfolios to the new composition of the index. Listed funds with an investment volume of more than 40 billion euros follow the Euro Stoxx 50, as shown by the data compiled by Bloomberg.

Deutsche Bank's current weighting of 0.75% in the index means that about 33 million Germans The bank shares held by exchange-traded funds would flood the market in the event of a financial crisis. 39, fit of the index. This equates to about 1.9 times the average daily trading volume for the last three months as compiled by Bloomberg.

The data compiled by Streich since 2000 show that stocks that have left the index average reach 5% the month before the announcement, 6 percent have lost in value and another 3 percent between Announcement and adjustment.

The impact on the Deutsche Bank rate could be mitigated by the fact that potential foreclosure will not be a surprise, Streich said. "With the adjustment already so clear, many active investors have plenty of time to anticipate retirement and adjust portfolios." On the other hand, passive index images usually only occur 24 to 48 hours before being adjusted for actions, adds the index specialist.

(Bloomberg)