Deutsche Bank is the source of a €150m loan to Wirecard’s founder Markus Braun, with Germany’s largest lender accepting as collateral almost half his shares in the controversial payments group.
The so-called margin loan was disclosed in December 2017 in filings from Wirecard without identifying the lender. People familiar with the matter said Deutsche Bank made the loan. One said it reflected Deutsche Bank’s ambition to do more business with wealthy individuals and family offices.
Deutsche Bank and Wirecard both declined to comment.
Banks provide margin loans for wealthy, stock-rich executives to give them access to cash without selling their shares. To protect the lender against losses, these borrowers usually have to agree to either pay money, hand over shares or relinquish other assets if the price of a stock falls sharply.
These loan products can be a source of lucrative fees for lenders but have also come under scrutiny following unexpected and severe share reversals. For instance, a group of banks suffered heavy losses on margin loans to the chairman of South Africa-based retail conglomerate Steinhoff, dramatically changing lenders’ risk appetite.
The arrangement with Mr Braun — whose 8.6m shares in Wirecard give him a 7 per cent stake, making him the largest shareholder — exposes Germany’s largest bank to the risk of a further large slide in the highly volatile stock.
The company’s share price quadrupled from €45 to more than €191 from the start of 2016 until the end of August last year. The gains, which saw the company’s market value reach €24bn, turned Mr Braun into a billionaire.
Since late January, when the Financial Times reported that a senior Wirecard executive was suspected of using forged and backdated contracts in a string of suspicious transactions, Wirecard has lost more than a third of its stock market value.
In late 2017, Wirecard disclosed in a regulatory filing that Mr Braun had pledged 4.2m shares of Wirecard to an unidentified third party. Three people familiar with the transaction told the FT that the shares were used as collateral in a margin loan to Mr Braun; two of them added that it was provided by Deutsche Bank.
The loan volume stands at about €150m, according to people familiar with the transaction. This implies a loan-to-value ratio of 40 per cent compared with the then-market value of €390m of the Wirecard shares that were pledged as collateral.
Despite the slump in Wirecard’s shares this year, the share collateral is worth close to €410m, avoiding problems for both parties.
Back in September 2018, Mr Braun told the FT that at that point in time, he had only partly used the credit line supplied by the margin loan. “The basic idea is that I don’t have to touch my Wirecard shares, which I see as the most interesting investment over the next 10 years, but still have the financial leeway to do other investments,” Mr Braun had said.
Back then, he stressed that the loan was not provided by Wirecard’s own bank but declined to comment on its size and source.
The loan to Mr Braun, who is chief executive and chief technology officer of Wirecard, was signed off the same month that a raft of investment banks suffered huge losses on a margin loan linked to Steinhoff.
After that incident, investment banks began syndicating margin loans much more broadly, a practice where the original lenders sell on some of their exposure to other financial institutions to spread the risk.
Risk committees at several leading banks also stopped the practice of offering margin loans to borrowers who were heavily involved in running the underlying company, such as chief executives or chairmen.
Two people at rival banks who deal with such loans said they believed Deutsche Bank has not syndicated the loan and still holds the full amount on its balance sheet. Deutsche Bank declined to comment.
