Deutsche Bank has confirmed it is buying a 29.75% stake in Germany’s biggest retail bank Postbank for 2.79bn euros ($3.9bn; £2.2bn).

Worth 57.25 euros a share – the offer is greater than the firm’s share price, which ended at 47.51 euros on Thursday.

The news hit Postbank’s shares as Deutsche Bank said it would have to raise 2bn euros through a share placing to fund the purchase.

It will allow Deutsche Bank to expand its presence in consumer banking.

“For relatively little capital, we have secured the dominant position in Europe’s biggest economy forever,” said Deutsche Bank chief executive Josef Ackermann.

But the complicated structure of the deal left analysts unhappy.

“This is bad,” said Dirk Becker, an analyst at Landsbanki Kepler.

“I don’t know why Deutsche are doing it in the first place; it doesn’t fit. I don’t know why they are doing it for this price. It all seems to have been pretty spontaneous.”

Complicated deal

It was thought that Deutsche Bank could not afford to buy all the shares owned by Deutsche Post straight away because of financial problems due to credit crunch related write-downs.

But as part of the deal, it has secured the option to buy additional shares for 55 euros at a later date.

Meanwhile, Deutsche Post has the option of forcing Deutsche Bank to buy its remaining 20.25% stake plus one share in Postbank, but at a lower price of 42.80 euros per share.

It is hoped the deal, dependent on regulatory approval, will complete in the first quarter of 2009.

Deutsche Bank said the move would not result in the closure of any branches or job cuts.

This is unlike the other major consolidation in Germany banking – Commerzbank’s 9.8bn euro takeover of Dresdner – which will result in about 9,000 job losses.

‘Highly complementary’

Postbank has Germany’s biggest branch network with almost 15 millions customers.

The acquisition will allow Deutsche Bank to almost double its German client base, which currently stands at about 10 million.

“Deutsche Bank’s and Postbank’s service offering is highly complementary with attractive opportunities for cross-selling of financial products,” a statement released by Deutsche Bank said.

Postbank’s shares tumbled as much as 12% after the announcement, but clawed back some of those losses in the course of the session to trade down almost 7% at 42.6 euros.

Deutsche Bank’s shares also fell, down 3.5%.

Shares in post office operator Deutsche Post climbed 3% as investors looked forward to a windfall payout.

News reported by The BBC

Merrill Lynch, Goldman Sachs and Deutsche Bank are the latest banks to reach a settlement with US regulators over the sale of risky securities.

The banks have agreed to buy back billions of dollars in auction-rate securities and pay fines, after allegations that they misled investors.

Of the three firms Merrill Lynch is to pay the highest fine of $125m (£66m).

Other banks that have reached similar settlements with regulators include Morgan Stanley and JP Morgan Chase.

New York Attorney General Andrew Cuomo has been leading the probe, with the support of federal and state regulators.

The banks have been accused of marketing the financial products, called auction-rate securities, as much safer than they were.

Investors were told that auction-rate securities would return more than money market investments and be easy to sell.

FINES PAID SO FAR
UBS: $150m
Merrill Lynch: $125m
Citigroup: $100m
Morgan Stanley: $35m
JP Morgan: $25m
Goldman Sachs: $22.5m
Deutsche Bank: $15m

Under the latest deal with Mr Cuomo, Merrill Lynch said it would repurchase up to $12bn in auction rate securities as well as pay the $125m fine.

Deutsche Bank meanwhile has a $15m fine to pay and must buy back some $1bn of the investments.

Goldman Sachs has a $22.5m fine and has agreed to buy back $1.5bn in securities.

Earlier this year, Citigroup and Swiss banking giant UBS reached a settlement to buy back $26bn of the securities.

Following the latest settlement Mr Cuomo said: “This has been a great day of progress,” adding that a number of banks were still being investigated.

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Deutsche Bank has written down another 2.7bn euros ($3.6bn; £1.8bn) between April and June, taking its credit crunch bill to more than 7bn euros.

Unlike many of its global rivals, Deutsche Bank managed to make a profit in the quarter even after the problems.

Pre-tax profits came in at 642m euros, well down on the 2.7bn euros it made in the same period a year earlier.

Almost half of the write-downs were caused by investments in assets that were backed by residential mortgages.

Exposure to monoline insurers, which guarantee the repayment of a bond if its issuer is unable to do so, as well as under-performing investments in commercial property, made up much of the rest of the write-downs.

“The second quarter of 2008 proved to be another very challenging quarter for the banking industry,” said chief executive Josef Ackermann.

“We remain cautious for the remainder of 2008.”

The credit crunch began in the US where it was sparked by record defaults on sub-prime mortgages. Sub-prime lenders provide financing to people with poor or non-existent credit histories.

It later emerged that many European banks had bought repackaged bundles of debts which were linked to US residential mortgages.

Some of the European banks have now been hit as hard as their US counterparts in terms of losses from the credit crunch.

News reported by The BBC

LONDON (Reuters) – Vulture funds are circling housebuilders as their debt and equity prices plunge, debt traders said, hoping for rich pickings as a 10-year boom in the sector is ended by an economic slowdown.

The funds, which look for profit in distressed assets, have been attracted by prices as low as 20 pence in the pound for the debt of some of Britain’s well known housebuilders, one trader said.

Discounts offered at banks such as Lehman (LEH.N: Quote, Profile, Research), Deutsche Bank (DBKGn.DE: Quote, Profile, Research) or Merrill Lynch MER.L average about 50 percent, distressed traders said.

“In due course, I would expect the debt to trade down significantly,” said Peter Baldwin, a partner at law firm Jones Day, which specialises in debt restructurings.

Vulture funds buy cheap debt in the hope its value will increase in the short to medium term. Others look for companies in danger of breaching bank loan covenants that open up the opportunity to gain control through a debt-for-equity swap.

The vulture funds are currently focusing on leverage buy-outs — acquisitions that are largely financed by debt — as they are more vulnerable to the credit crunch.

Housebuilders Crest Nicholson and McCarthy & Stone are two examples where funds are offering to take the debt off the books from the original lenders, the trading sources said.

Crest Nicholson Plc became a private company last year, when it was acquired by Castle Bidco Ltd, a 50-50 joint venture between HBOS (HBOS.L: Quote, Profile, Research) and West Coast Capital.

News reported by Reuters

The price of crude oil has retreated slightly after hitting record highs above $142 a barrel, amid concerns that supply will not meet demand.

In London, Brent crude was trading at $140.16, having earlier hit $142.13.

New York light crude had climbed as high as $142.26 a barrel, but later fell back to $140.34.

Producers’ group Opec has been under pressure to boost production, though recent reports have shown its members are split over whether to lift output.

Libya has threatened to cut production because the market is well supplied.

Libyan threats

Libya’s most senior oil official, Shokri Ghanem, said on Thursday he was looking into the possibility of cutting production in response to US threats against oil producers.

Analysts blame the price of crude on a variety of factors from basic supply and demand to hedge funds.

Opec has said speculators have played a part in the oil spike this year, but others are not convinced.

“We believe the factors driving oil prices higher are fundamental and not speculative,” Deutsche Bank said in a research note.

“Oil needs to rise to $150 a barrel for oil as a share of global Goss Domestic Produce to reach the levels that occurred in the early 1980s,” according to the bank.

But tensions between oil consumers and producers are rising.

The US House of Representatives has passed a bill that would allow the Justice Department to sue Opec members for limiting supplies.

But the bill has yet to be backed by the Senate and the White House has already said it would veto the bill.

There was also scepticism about whether there will actually be a cut in Libya, because of soaring prices.

“I doubt that any real effort in cutting output would be forthcoming, considering that pricing continues to hit new records,” said Victor Shum, an analyst at Purvin & Getz.

‘Radically new level’

Meanwhile, the chief executive of Gazprom, Alexei Miller, has been talking down the influence of Opec.

Saying that Opec had no real impact on prices, he told the Financial Times: “Not a single decision has been passed of late that would really influence the global oil market.”

He also said that the world was undergoing “a great surge in oil and gas prices, which will end with prices at a radically new level”.

Mr Miller predicted that Gazprom would become the most influential company in the energy business.

On Friday, the firm approved the replacement of former chairman Dmitry Medvedev, who is now Russian president, with former prime minister Viktor Zubkov.

News reported by BBC