FRANKFURT/LONDON (Reuters) - A report that Deutsche Bank (DBKGn.DE) was close to a cut-price settlement with U.S. authorities over the sale of toxic mortgage bonds helped to fuel a recovery in its shares on Friday after its chief executive said the group remained stable.

Deutsche, which is Germany’s largest bank and employs around 100,000 people, has been engulfed by crisis after being handed the demand for up to $14 billion earlier in September by the Department of Justice (DOJ) for misselling mortgage-backed securities before the financial crisis.

Deutsche shares, which hit a record low earlier on Friday, extended their recovery after the AFP news agency said the bank was near to a settlement for $5.4 billion. Deutsche and the German finance ministry declined to comment on the report.

The bank is fighting the fine but would have to turn to investors for more money if it is imposed in full. The German government this week denied a newspaper report that it was working on a rescue plan for the bank.

Worries over a major bank in Europe’s largest economy and talk of a government rescue have stirred painful memories of the 2007-2009 financial crisis and sent tremors through global markets.

Chief Executive John Cryan had tried to rally staff with a letter addressing reports of the departure of a few hedge fund clients, hitting out at “forces” that wanted to weaken trust in the bank.

People familiar with the matter had earlier told Reuters that one large hedge fund in Asia had pulled out collateral from Deutsche amounting to $50 million in the last two days, while other sources said this had happened elsewhere, albeit on a small scale.

Cryan sought to put the moves into perspective.

“We should look at the complete picture,” Cryan said in the letter to the bank’s workers, adding that Deutsche had more than 20 million customers and reserves of more than 215 billion euros.

“We are and remain a strong Deutsche Bank.”

SHARES SEESAW

Deutsche shares were volatile again, initially falling around 8 percent in Frankfurt to a record low below 10 euros before bouncing back to close six percent higher at 11.57. The bank’s U.S.-listed shares (DB.N) were up 13.7 percent at $13.05 in heavy midday trading in New York.

The shares have lost half their value this year and the bank’s market capitalization has fallen to around 15 billion euros ($16.8 billion).

Trading volume in Deutsche’s debt has more than doubled this week and soared 15-fold in a month as investors rushed to offload the troubled German lender’s bonds.

A statue is seen next to the logo of Germany's Deutsche Bank in Frankfurt, Germany, January 26, 2016. REUTERS/Kai Pfaffenbach/File Photo

Deutsche is much smaller than Wall Street rivals such as JPMorgan (JPM.N) and Citigroup (C.N) .

But it has significant trading relationships with all of the world’s largest finance houses and the International Monetary Fund this year identified it as a bigger potential risk to the wider financial system than any other global bank.

Following the financial crisis, banks are now required to have plans showing how they would respond to a major market shock, with improved controls on liquidity. Regulators also draw up plans on how lenders could be smoothly closed down in the event of impending failure.

Italy, whose banks have their own troubles caused by soured loans, called for swift action on Deutsche.

“Just like the problem of bad bank loans must be solved within a reasonable time frame, so it should be for Deutsche Bank’s problems,” Economy Minister Pier Carlo Padoan told Italian daily La Stampa.

With Germany facing elections next year, there is little political appetite for helping a group disliked by many Germans because of its pursuit of investment banking abroad that resulted in billions of euros of penalties for wrongdoing.

However, the German government faces a delicate balancing act with a deeper crisis for Deutsche Bank potentially spilling over into its economy.

The problems of Deutsche, once Germany’s flagship on Wall Street, are awkward for Berlin, which has berated many euro zone peers for economic mismanagement and pushed for countries such as Ireland and Greece to cope with their banking problems alone.

Deutsche Bank CEO John Cryan addresses the bank's annual general meeting in Frankfurt, Germany, May 19, 2016. REUTERS/Kai Pfaffenbach

Dutch finance minister Jeroen Dijsselbloem, who chairs meetings of euro zone finance ministers, said on Friday that Deutsche Bank must survive “on its own”, without assistance from the German state.

German banks have found their profits squeezed by the European Central Bank’s ultra-low interest rates and Commerzbank, the country’s second largest lender, is cutting almost 10,000 jobs.</s>Deutsche Bank is throwing its energies into reaching a settlement before next month’s presidential election with US authorities demanding a fine of up to $14 billion for mis-selling mortgage-backed securities.

The threat of such a large fine has pushed Deutsche shares to record lows and a cut-price settlement is urgently needed to reverse the trend and help to restore confidence in Germany’s largest lender.

A media report late on Friday that Deutsche and the US Department of Justice (DoJ) were close to agreeing a settlement of $5.4 billion lifted the stock to close 6 per cent higher, but that report has not been confirmed.

“Clearly, so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry,” UniCredit’s chief economist, Erik F Nielsen, wrote in a note on Sunday.

Deutsche is much smaller than Wall Street rivals such as JPMorgan and Citigroup.

But it has significant trading relationships with all of the world’s largest finance houses and the International Monetary Fund (IMF) this year identified it as a bigger potential risk to the wider financial system than any other global bank.

Deutsche chief executive John Cryan will be in Washington this week for the annual meeting of the IMF, and the Frankfurter Allgemeine Zeitung reported that other executives would join him to try to negotiate a settlement with the US authorities.

Like fellow large European banks also under investigation for mis-selling mortgage-backed securities, Credit Suisse and Barclays, Deutsche will want to get a deal done with the current administration still in power.

A new administration, to be installed after the November 8th election, will bring unknown risks and likely delays.

At home, Deutsche Bank is fighting a rearguard action, seeking to shore up confidence among the public, politicians and regulators who say the bank brought many of its problems upon itself by overreaching itself and then reacting too slowly to the 2008 financial crisis.

It suffered a further blow to its image this weekend with a third IT outage in the space of a few months on Saturday that prevented some customers getting access to their money for a short time.

German business leaders from companies including BASF, Daimler, E.ON, RWE and Siemens defended the bank in a front-page article in the Frankfurter Allgemeine Sonntagszeitung.

“German industry needs a Deutsche Bank to accompany us out into the world,” BASF chairman Juergen Hambrecht said.

A spokesman for a blue-chip company that did not feature in the article said he had been asked by Deutsche for an executive to provide a similar supportive comment.

Deutsche Bank and the government in Berlin have had to play a delicate balancing act, emphasising the substance and importance of the bank without implying any need for state aid or willingness to supply it.

The bank has a market capitalisation of only around €15.9 billion and would almost certainly have to raise fresh cash to pay the full DoJ demand.

Both the bank and Berlin this week denied reports that the government was preparing a rescue plan.

The Bild am Sonntag newspaper wrote on Sunday that Deutsche’s chairman had informed Berlin just before it disclosed the potential $14 billion fine but had not asked for help.

The same newspaper quoted the president of the Bavarian Finance Centre, Wolfgang Gerke, as saying the German government should step in and buy a 20 per cent stake in the bank before its value fell any further. The group represents financial services companies in the southern German state.

“Fundamentally, I’m against state interventions,” he told the newspaper, but added that in this case a government stake would be “a signal that could turn the whole market”.</s>Germany's largest lender said about two weeks ago it would fight a $14 billion demand from the U.S. Department of Justice to settle claims it missold the securities.

An agreement could be announced in the next couple of days, a person familiar with the matter told AFP.

The final amount of the settlement could be slightly different, the source said. (yhoo.it/2dfHX74)

Deutsche Bank declined to comment on the report and a spokesman for the DoJ did not immediately respond to a request for comment.

The bank's U.S.-listed shares were up 13.7 percent at $13.05 in heavy midday trading. The stock rose as much as 15.16 percent, its best intraday percentage gain in nearly five years.</s>Deutsche Bank executives are heading to the United States in the coming days to negotiate a settlement over a fine of up to $14 billion for misselling mortgage-backed securities, the Frankfurter Allegemeine Zeitung reported. The potential fine, announced two weeks ago, has sent shares in Germany’s biggest lender into freefall.

On Friday, the stock partially recovered after a media report that the two sides were close to a settlement of $5.4 billion. The FAZ did not cite any sources for its report.Shares in the troubled bank closed at €11.57, up 6.4 per cent, the biggest gain since April.

Agence France-Presse reported that the lender is nearing a settlement with the DoJ in an investigation tied to residential mortgage-backed securities, citing an unidentified source. Spokesmen for the Frankfurt-based lender and the DoJ declined to comment.

Deutsche Bank’s stock and debt have been under pressure after the justice department earlier this month requested $14 billion to settle an investigation into residential mortgage-backed securities.

While Deutsche has said it does not expect to pay a figure anywhere near the $14 billion demanded, the department is pushing to agree a trio of settlements ahead of the US election in November.

In a memo to staff earlier on Friday, chief executive John Cryan noted that rivals had reached far lower settlements with US regulators over misdemeanours in the past.

“Even the uncertainty over the outcome of our legal process in the US is not a reason for the pressure on our share price, if we take the settlements of our peers as a benchmark,” he wrote.

“The amount would be very good news, below what consensus expects now,” said Jerome Legras, an investor at Axiom Alternative Investments, who holds a short position on the lender. “Deutsche Bank has dropped so much as there is so much speculation circulating – at some point people just want to make a profit on short positions.”

Analysts at JPMorgan Chase wrote in a note to clients earlier this month that a US settlement of $3 billion to $3.5 billion would leave the German lender room to settle other legal issues. Any additional $1 billion in litigation charges would erode capital by 24 basis points, it said.

The bank’s common equity Tier 1 ratio stood at 10.8 per cent at the end of June.

Deutsche Bank has long struggled to adapt to an era of tougher capital requirements and diminished trading revenue. Mr Cryan has already said that the lender may fail to be profitable this year, calling it a peak restructuring year, as he eliminates thousands of jobs and cuts risky assets.

But he added that, excluding one-off costs, the bank had made a pre-tax profit of €1.7 billion in the first half of the year, and drew attention to the strength of Deutsche’s liquidity reserves, which stand at €215 billion.

The shares had been pushed to a fresh record low earlier on Friday after reports that some hedge fund clients had reduced their financial exposure to the bank.

Deutsche Bank has lost about 49 per cent of its market value this year.</s>Germany's Finance Ministry declined to comment on Friday on a report that Deutsche Bank was close to a $5.4 billion settlement with U.S. authorities over alleged misselling of mortgage-backed securities.

"We have no comment on this," Finance Ministry spokesman Juerg Weissgerber said in an emailed comment to Reuters.

Agence France Presse reported that Deutsche Bank was near a $5.4 billion settlement with the U.S. Department of Justice. News last week that the U.S. government would levy a fine as high as $14 billion sent Deutsche's share price plummeting to record lows.</s>No matter how hard it tries, Deutsche Bank’s subprime chickens keep coming home to roost. This week’s crisis: the aftershocks of a $14 billion fine imposed by the United States to punish Germany’s biggest lender for mis-selling subprime mortgage products.

Disputed reports of a state aid rebuff for Deutsche from Chancellor Angela Merkel pushed the bank’s shares down this week to their lowest level in 30 years. On paper, Deutsche Bank is worth more than €60 billion but is currently valued at less than a quarter of that.

After posting record losses of €6.8 billion last year, the Frankfurt colossus suffered a serious credibility crisis in February over a miscommunicated bond-buyback.

In hindsight, all of that may have been the overture to the current drama. It’s a been a long, painful fall for Deutsche Bank. Its shares are now trading at just €10.40 – down from €32 last year and almost €80 in 2007. Insurance on Deutsche credit defaults has spiked to levels not seen since the financial crisis. Covering a Deutsche demand of €100,000 now costs €2,420 annually – up from €589 in March 2015.

After flying high in the early 2000s on Wall Street, joining the international big league of high-risk, high-yield financial products, Deutsche Bank has spent the current decade nursing a post-crash hangover that won’t lift.

This is no ordinary hangover, however, nor is this an ordinary bank. This is Deutsche Bank, a year older than modern Germany itself, and, since 1870, the glue holding together Europe’s largest economy. But years of legal battles and restructuring woes have seen investors asking whether the Frankfurt giant is coming unstuck.

Last year, three generations of Deutsche chief executives lined up in a German courtroom to face charges that their loose talk had ruined Kirch, one of Germany’s largest media empires. All three were exonerated, but only after damaging court testimony exposed the bank’s inner workings.

Relief at shaking off the Kirch case was overshadowed by the simultaneous news of a record $2.5 billion fine to US and British authorities for manipulating the Libor interbank borrowing rate. The Libor scandal has yet to run its course. Former Deutsche traders were indicted last June in New York and one, Timothy Parietti, has admitted rigging the benchmark rate linked to trillions of dollars in securities and loans as part of a deal with prosecutors to help the US justice department with an investigation that it has signalled may yet claim more senior Deutsche scalps.

With all this going on, the average German would be forgiven for thinking that Deutsche, once a dull-but-serious bank with an occasional scandalous sideline, is now an institutional scandal with a sideline in banking.

Which takes us to the latest drama: the $14 billion put forward by the US justice department as the price for putting to bed Deutsche Bank’s subprime mortgage mis-selling of a decade ago.

Based on previous settlements with other errant banks, the Germans are confident the final deal will be significantly lower than this opening bid. But even a reduced fine could swallow in one gulp the entire €5.5 billion Deutsche has set aside for its legal battles that, according to one source, number in excess of 6,000. Apart from the mortgage fine and currency manipulation probes, it is being investigated for its precious-metals trading and billions of dollars of transfers out of Russia.

Deutsche has liquidity reserves of about €200 billion but, preparing for the worst, has begun selling off assets to raise more cash. Another option, selling more shares, would dilute existing stock and spook already nervous investors. That is not something Deutsche Bank is considering “at present”, chief executive John Cryan told Bild on Wednesday.

The only other option is state aid, something Deutsche has resisted in the past. In Bild, the British-born chief executive bristled with indignation at claims he went cap-in-hand to Dr Merkel over the summer – and was rebuffed.

“At no point did I ask the chancellor for help, I didn’t even hint at anything of the sort,” he said, insisting the bank was financially sound.

Some in Germany have drawn parallels to the Volkswagen diesel scandal: another blue-chip brand laid low by dirty dealings. But others see conspiracy theories, suggesting Deutsche is the latest firm to be dragged into a transatlantic tit-for-tat after VW and Apple .

As the finger-pointing starts, it’s worth remembering that Deutsche Bank has dug this hole for itself. The go-to read for this is the 2011 US Senate report Wall Street and the Financial Crisis: Anatomy of a Financial Collapse. In emails quoted here, Deutsche’s one-time top global trader Greg Lipmann described his bank’s own security-backed products as “crap” but confessed to enjoying the challenge of trying to “dupe someone” into buying them.

Even in June 2006, as Mr Lipmann was warning his colleagues of the looming disaster, he admitted that it was difficult to quit the gambling table.

“We are looking for ways to get out of this risk but, for now, the view has been: ‘We like the fees’.”

A colleague of his called Rocky Kurita, apparently a Vanilla Ice fan, put it another way in an email to Mr Lipmann a year earlier: “If there is a problem, yo, we’ll solve it/Check out the spreads while my structurer revolves it.”

Deutsche Bank’s US financial dealings involved, in butchery terms, repackaging low-grade offal as high grade round steak mince, offloading the “crap” before it began to stink, and pocketing the difference.

Only after the crash did many German banks in New York find out that they were the running joke of the street, viewed by other institutions as the useful idiots worth approaching to offload financial products no one else wanted to buy.

German financial analysts suggest many of the country’s banks were happy to take greater risks than the competition because their hybrid status – US investment banks with a continued domestic financing foothold – meant Germany would not let them fail.

But that is the question that has come to a head this week: does Germany’s implicit guarantee still hold for Deutsche?

On paper, the European Union’s post-crisis bailout rules, implemented in Germany last year, lay out a clear liability cascade for struggling banks that put the taxpayer right at the end. But Deutsche Bank is not just a fallen star of Wall Street, it is a financier of Germany’s Mittelstand – the small- and medium enterprises that form the backbone of the domestic economy. They need a strong Deutsche Bank, as do the companies they trade with around Europe.

With elections looming next year, bailing out Germany’s largest bank would be an economic and political disaster for Angela Merkel – and at odds with her entire line in the years of crisis.

But the ambiguous words of wisdom – and warning – on the lips of countless Berlin politicians this week: Deutsche Bank is bigger than Lehman Brothers.

The level of fear in Frankfurt can be gauged by the utter lack of Schadenfreude among Deutsche’s private-bank competitors. In a worst-case scenario, next to Deutsche’s own investors, they would be on the bail-in hook to cover Deutsche’s losses through Germany’s private-bank deposit-insurance fund. In public, though, they insist there is no problem.

“We are not facing a compensation claim through Deutsche Bank,” said Thomas Schlüter, spokesman for the Association of German Banks, (Bankenverband), representing more than 200 private institutions. “There’s been a lot of speculation in the last days but everything has been repudiated.”

However, an analyst at one Frankfurt bank, who asked not to be named, said everyone was “shaken up” by the $14 billion fine. Can Germany’s largest bank shoulder such a burden, they wonder, and how much time and energy will that and other legal battles sap from bank managers who are supposed to be steering a radical restructuring effort to future-proof the institution?

“When a reputation takes as much damage as Deutsche, things can become a self-fulfilling prophecy,” said one banking analyst. “It is a question of trust. Do capital markets and private customers trust Deutsche Bank? If not, Germany – and Europe – has a big problem.”</s>Deutsche Bank ( ) executives are heading to the United States in the coming days to negotiate a settlement over a fine of up to $14 billion for misselling mortgage-backed securities, the Frankfurter Allegemeine Zeitung reported.

The potential fine, announced two weeks ago, has sent shares in Germany's biggest lender into freefall. On Friday, the stock partially recovered after a media report that the two sides were close to a settlement of $5.4 billion.

The FAZ did not cite any sources for its report.

Deutsche Bank did not immediately respond to a request for comment on Chief Executive John Cryan's travel plans.</s>The government denied a newspaper report on Wednesday that it was working on a rescue plan for Germany's biggest bank, as its shares went into a tailspin fueled by a demand for up to $14 billion from U.S. authorities for misselling mortgage-backed securities before the financial crisis.

Germany, which has insisted Italy and others accept tough conditions in tackling their problem lenders, can ill afford to be seen to go soft on its flagship bank, the Frankfurter Allgemeine wrote.

"Of course Chancellor Merkel doesn't want to give Deutsche Bank any state aid," it wrote in a front-page editorial. "She cannot afford it from the point of view of foreign policy because Berlin is taking a hard line in the Italian bank rescue."

The Munich-based Sueddeutsche Zeitung wrote that Merkel would be breaking a promise to taxpayers if she were to bail the bank out, which could spell disaster for her re-election bid next year as the anti-immigration AfD party gains ground.

The AfD is already benefiting from a backlash against Merkel's open-door refugee policy, making huge gains in two regional elections last month and hitting an all-time high of 16 percent support in an opinion poll last week.

"A state aid package would drive voters into the arms of the AfD," the Sueddeutsche wrote in an editorial.

"Domestic political considerations make it unlikely that Berlin would play this joker. Even more unlikely is that the European Commission would agree. The political risk would be simply too high."

Shares in Deutsche Bank recovered somewhat on Friday from a record low early in the day after a report that it was close to a cut-price settlement of $5.4 billion instead of $14 billion.

The bank, the U.S. Department of Justice and the German finance ministry all declined to comment on the report.

The crisis also prompted Deutsche Bank's normally reticent Chief Executive John Cryan to publish a letter seeking to reassure staff the bank was stable and hitting out at "forces" that wanted to weaken trust in the bank.

The Stuttgarter Zeitung wrote on Saturday: "Deutsche Bank has to win back ground here because as exaggerated as the reports of an existential danger to the bank may have been, just as obvious are its continuing difficulties."</s>Pressure on Deutsche Bank has increased since the lender revealed two weeks ago the US Justice Department is asking for $14 billion to settle a probe tied to residential mortgage-backed securities the bank traded before the 2008 financial crisis.

Amid concerns about the bank’s finances, about 10 hedge funds that use its prime brokerage service moved part of their listed derivatives holdings to other firms this week, according to an internal bank document Bloomberg News has seen.

Germany’s biggest lender is firing workers, dumping unprofitable clients and exiting businesses. Still, doubts remain about whether it has the resources to cope with multiple legal probes without raising capital -- though Deutsche Bank and the German government have said the company can stand on its own.

As the saga unfolds, here are 10 people who will be instrumental in deciding Deutsche Bank’s fate:

The US Justice Department’s No. 3 official is calling the shots in the Deutsche Bank talks. An antitrust lawyer by training, Baer was previously chief of the division that oversees reviews of mergers and acquisitions, where he gained a reputation for aggressively opposing deals the department deemed anticompetitive.

Baer last year secured guilty pleas and $6 billion in penalties from a group of lenders over currency-market rigging. While he hasn’t directly commented on Deutsche Bank, Baer says banks are to blame for slow progress in mortgage settlement talks. “Each prolonged the period in which a cloud of uncertainty hung over the institution,” Baer said in a speech this week. “And each paid a lot more than it would have if it had cooperated early on.”

Deutsche Bank’s chief executive officer is trying to shore up capital buffers and profitability while selling assets, cutting jobs, and suspending dividends. Cryan faces headwinds from volatile markets, negative interest rates and tougher regulatory scrutiny. Cryan this week told Germany’s Bild newspaper that raising capital is “currently not an issue” and said he has no interest in government support.

The chairman of Deutsche Bank’s supervisory board is known for his deep contacts across the industry. He chose Cryan to pick up the pieces after previous leaders failed to root out the misconduct that had drawn the wrath of prosecutors from New York to London. But Achleitner’s star has begun to fade as investors grow impatient with a plunging share price and continuing turmoil. The chinks became visible in April, when he became embroiled in a boardroom feud over probes into alleged wrongdoing.

The German chancellor would make the final decision on any state aid for Deutsche Bank. Having steered Germany through the 2008-2009 financial crisis, she’s a veteran of bank rescues. That experience has also given her an acute awareness of the political pitfalls of assisting the financial sector, especially as Germany prepares for national elections next year. Cautious by nature, this week she said she hopes the bank “can develop well.”

The German finance minister, the country’s elder statesman and Merkel’s chief lieutenant on financial matters, would craft and execute any government rescue of Deutsche Bank. In February he said he has “no concerns about Deutsche Bank.” These days, he’s avoiding public comment -- though on Wednesday his ministry denied a report in Die Zeit that the government was working on a rescue plan.

The European Central Bank president would likely become involved before a lender is liquidated or broken up. While decisions of the ECB’s supervisory arm are usually rubber-stamped by the Governing Council, in this case policy makers may want to weigh the gravity of a bank’s woes against the potentially crippling effects that dissolving a lender would have on the euro and Europe’s economic recovery. Draghi has said he doesn’t “share the view” that low interest rates -- the root of many of Deutsche Bank’s problems -- pose systemic risk.

The chair of the European Central Bank’s Supervisory Board is in charge of scrutinising Deutsche Bank’s activities and balance sheet. She will have the final say in setting the bank’s capital requirements for 2017, and would make the initial call on whether a struggling bank is no longer viable. She has suggested that Europe’s banking sector is ripe for consolidation.

The chairwoman of the Single Resolution Board in Brussels would manage any eventual liquidation or breakup of Deutsche Bank. Koenig is the first chief of the agency, established in December 2014 as a clearinghouse for plans to mitigate the negative impact of any major bank failure. As the former chief of Germany’s banking supervisor, she’s well acquainted with Deutsche Bank’s difficulties.

The president of BaFin, Germany’s financial markets watchdog, works with his Bundesbank and ECB colleagues to monitor banks. While Germany’s representatives on the ECB’s Supervisory Board include Bafin and the Bundesbank, only Hufeld has voting rights. He hasn’t commented on Deutsche Bank specifically, but Hufeld has said low interest rates are devastating bank profits and that institutions must cut costs to survive. “Things can’t continue as they have,” he said at a conference in Berlin on Wednesday.

The former Danish finance minister is now in charge of competition and state aid for the European Union’s executive arm. She would need to scrutinise any government rescue plan to check that it doesn’t fall afoul of the EU’s strict limits on giving companies public support.</s>The latest lurch came after Bloomberg reported that a number of hedge funds that clear derivatives trades with Deutsche had withdrawn some excess cash and adjusted positions held at the lender, a sign that counterparties are wary of doing business with it.

Barry Bausano, chairman of Deutsche's hedge fund business, told CNBC that its prime brokerage division, which services hedge funds, was "still very profitable" but said there was, "no question we have a perception issue."

Fabrizio Camelli, head of the Deutsche wealth management business, said the bank was seeking to reassure customers and had not seen "any noticeable outflow of client funds."

“Of course some of our customers are asking what is up with Deutsche Bank at the moment. We are telling them that we are doing better than it might seem from outside," he told Germany’s Sueddeutsche Zeitung daily.

In a statement, Deutsche said its trading clients remained largely supportive.

"We are confident that the vast majority of them have a full understanding of our stable financial position, the current macro-economic environment, the litigation process in the U.S. and the progress we are making with our strategy," it said.

The immediate cause of Deutsche's crisis is a fine, disputed by Deutsche, of up to $14 billion by the U.S. Department of Justice over its sale of mortgage-backed securities.

Profits at Germany's lenders have been squeezed by the European Central Bank's money-printing policy. They have been seeking to boost revenue by passing on costs to corporate customers and increasing fees for retail depositors.

Deutsche's U.S.-listed shares fell more than 9 percent in New York on Thursday after touching a record low in Europe this week.

Berlin has denied planning any repeat of the taxpayer-funded bailouts that Germany and other Western states staged during the global financial crisis.

This followed a newspaper report earlier in the week that the government had made provisional plans to rescue Deutsche.

Politicians are reluctant to back a group disliked by many Germans because of its pursuit of investment banking abroad that resulted in billions of euros of penalties for wrongdoing.

Eckhardt Rehberg, parliamentary budget spokesman for the ruling conservatives, signalled he would oppose any support.

"At the present time I would rule out any capital help. That would not be the right way to go," he told Reuters, echoing similar comments by Hans Michelbach, who heads the conservatives in the parliamentary finance committee.

But Jeffrey Gundlach, chief executive of DoubleLine Capital, said investors betting that Berlin would not rescue Deutsche could find themselves nursing big losses.

"The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be," said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine.

Chancellor Angela Merkel's popularity has declined because of her open-door policy for migrants, and if Deutsche Bank were to require state help, her standing as the leader who successfully steered Germany through the financial crisis could also be called into question.

Deutsche got through the global crisis without state aid, but Commerzbank, Germany's second-biggest lender, needed an 18.2 billion euro bailout in 2008 and the state still holds a 15 percent stake.

The problems of Deutsche, once Germany's flagship on Wall Street, are awkward for Berlin, which has berated many euro zone peers for economic mismanagement and pushed for countries such as Ireland and Greece to cope with their banking problems alone.

Austrian finance minister Hans Joerg Schelling also sought to play down fears over Deutsche, saying the case could not be compared with Lehman Brothers, the U.S. investment bank whose collapse in 2008 sent shock waves around the world.

"We have all the measures in place at a European level to stabilise financial markets," he told Reuters.

Like many of its peers, Deutsche has faced a series of lawsuits that often trace back to the boom years before the crash. Its litigation bill since 2012 has already hit more than 12 billion euros ($13.5 billion).

In July the bank barely scraped through European stress tests - designed to gauge its ability to withstand a crisis - and has warned it may need deeper cost cuts to turn itself around.
The Obama administration through the United States Department of Justice lowers the fine against Germany's Deutsche Bank to a settlement of US$5.4 billion after being handed a demand for up to $14 billion earlier this month over the sale of toxic mortgage bonds.