Tag Archives: Deutsche Bank

Deutsche Bank Death Spiral Hits Historic Low. European Banks Get Re-Hammered, by Wolf Richter

European banks are certainly a strong candidate to kick off the next financial crisis. From Wolf Richter at wolfstreet.com:

Just bumping along the bottom, from hopeless to hope and back to hopeless.

The amazing thing with Deutsche Bank shares is this: Since 2007, so for 12 years, bottom fishers have been routinely taken out the back and shot, every time, with relentless regularity – as have big institutional investors, from Chinese conglomerates to state-owned wealth funds, that thought they were picking the bottom. A similar concept applies to European banks in general. May 2007 was the high point. And it has been brutal ever since – 12 years of misery.

Deutsche Bank shares dropped another 2.9% on Monday in Frankfurt, and closed at a new historic low of €6.64 after hitting €6.61 intraday. This time, the blame was put on UBS analysts that finally stamped “sell” on the stock, replacing their “neutral” rating. Deutsche Bank’s market cap is now down to just €13.8 billion. Shares have plunged 39% over the past 12 months and 60% since January 2018 (data via Investing.com):

The bank has been subject to years of revelations of shenanigans that span the palette. Once a conservative bank that primarily served its German business clientele in Germany and overseas, it decided to turn itself into a Wall Street high-flyer that caused its shares to skyrocket until May 2007, when it got tangled up in the Financial Crisis that then led to a slew of apparently never-ending hair-raising revelations, settlements with regulators, and huge fines.

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Deutsche Bank Death Spiral Hits Historic Low. European Banks Follow, by Wolf Richter

The unremitting downtrend in European bank stocks is not a good sign for the global economy or financial markets. From Wolf Richter at wolfstreet.com:

Bottom fishers were taken out the back and shot.

It just doesn’t let up with Deutsche Bank — or with European banks in general. A new day, a new scandal, a new historic low in the share price that has been in a death-spiral for over 10 years. Deutsche Bank shares plunged 7% today in Frankfurt, to a new historic low of €7.00, after briefly threatening to close at an ignominious €6.99. Its market cap is now down to just €14 billion. The stock has plunged 56% so far this year:

The European Commission — the executive branch of the EU — after nearly three years of investigating this, announced today that is suspects four unnamed banks of colluding to manipulate the vast market for US-dollar-denominated government-backed bonds between 2009 and 2015.

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Deutsche Bank, Again, by Global Macro Monitor

On a mark-to-market basis, is Deutsche Bank worth anything? From the Global Macro Monitor at macromon.wordpress.com:

Whenever we see markets tanking as they have been for the past few days with the Dow down almost 1,000 points (3.7 percent) since Friday’s close, we think counterparty risk may be spooking traders and investors.   We suspect, and we could be wrong, there is a growing concern over Deutsche Bank’s (DB) stock making new all-time lows.

We see a lot of hits on our blog today on our past posts about Deutsche Bank.

Biggest Globally Systemically-Important Bank (GSIB)

Deutsche Bank, which has been labeled by the IMF as the biggest contributor to global systemic risk,  hit a new all-time low in Frankfurt this morning, closing at around €8.17,  down over 91 percent from its pre-GFC high and almost 50 percent year-to-date.  The latest hit comes from its involvement with Danske Bank, who is wrapped up in a money laundering scandal in Estonia.

Whenever a GSIB stock is making a new low,  it’s time to sit up, stand up and listen.

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If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming, by Michael Snyder

Very few come right out and say what they mean anymore, but if you pay close attention, sometimes you can figure it out anyway. From Michael Snyder at theconomiccollapseblog.com:

Sometimes, a strongly-worded denial is the most damning evidence of all that something is seriously wrong.  And when things start to really get crazy, “the spin” is often the exact opposite of the truth.  In recent days we have seen a lot of troubling headlines and a lot of chaos in the global financial marketplace, but authorities continue to assure us that everything is going to be just fine.  Of course we witnessed precisely the same thing just prior to the great financial crisis of 2008.  Federal Reserve Chair Ben Bernanke insisted that a recession was not coming, and we proceeded to plunge into the worst economic downturn since the Great Depression.  Is our society experiencing a similar state of denial about what is ahead of us here in 2018?

Let me give you a few examples of some recent things that global economic leaders have said, and what they really meant…

Tesla Motors CEO Elon Musk: “We are definitely not going bankrupt.”

Translation: “We are definitely going bankrupt.”

Tesla is a company that is supposedly worth 51 billion dollars, but the reality is that they are going to zero.  They have been bleeding massive amounts of cash for years, and now a day of reckoning has finally arrived.  A severe liquidity crunch has forced the company to delay payments or to ask for enormous discounts from suppliers, and many of those suppliers are now concerned that Tesla is on the verge of collapse

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

Shark Tank billionaire Mark Cuban: “I’ve got a whole lot of cash on the sidelines.”

Translation: “I believe that the stock market is about to crash.”

To continue reading: If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming

Could Big European Banks Drag the World Economy Down? by Peter Schiff

The European banking sector may be where the next financial crisis starts, but all of the world’s banks have assets and liabilities far in excess of their capital, and they are all interlinked, so once the crisis starts it will spread quickly. From Peter Schiff at schiffgold.com:

Humans are by nature somewhat myopic. We tend to focus primarily on what is right in front of us and filter out things further removed. As a result, we can sometimes overlook important factors.

As Americans, we generally devote most of our attention on American policy. We follow political maneuverings in Washington D.C., study the Fed’s most recent pronouncements and track the US stock markets. But we also need to remember there is a whole wide world out there that can have a major impact on the larger economy and our investment portfolio.

One factor that could potentially rock the world economy that a lot of American may not be aware of is the mess in the European banking system.

In a recent podcast, Peter Schiff talked about the impact the European Central Bank could have on the economy. Mario Draghi’s comments indicating he plans to hold interest rates at zero for another year roiled the markets. But that’s not the only issue facing the eurozone. As economist Dr. Thorsten Polleit noted in a recent article published by the Mises Wire, many euro banks are in “lousy” shape.

So what? you might ask. Well, the European banking system is huge. It accounts for 268% of gross domestic product (GDP) in the euro area. If the sector collapses, that’s bad news for the broader world economy.

One of the biggest problem children in European banking is Deutsche Bank. As of March 2018, the German giant had a balance sheet of close to 1.5 trillion euro, accounting for about 45% of German GDP. Polliet described this as an “enormous, frightening dimension.”

Beware of big banks — this is what we could learn from the latest financial and economic crises 2008/2009. Big banks have the potential to take an entire economy hostage: When they get into trouble, they can drag everything down with them, especially the innocent bystanders – taxpayers and, if and when the central banks decide to bail them out, those holding fiat money and fixed income securities denominated in fiat money.”

To continue reading: Could Big European Banks Drag the World Economy Down? 

Deutsche Bank CoCo Bonds Plunge, Shares Hit Record Low, after US Entity Makes FDIC’s “Problem Bank List”, by Wolf Richter

Who’s going to “win” the race to the bottom of the banking pile: Italy’s banks or Germany’s Deutsche Bank? It could be a dead heat. From Wolf Richter at wolfstreet.com:

The old question: When will she buckle?

Shares of Deutsche Bank fell 7.2% today in Frankfurt to €9.16, the lowest since they started trading on the Xetra exchange in 1992. They’re now lower than they’d been during its last crisis in 2016. And they’re down 71% from April 2015.

This came after leaked double-whammy revelations the morning: One reported by the Financial Times, that the FDIC had put Deutsche Bank’s US operations on its infamous “Problem Bank List”; and the other one, reported by the Wall Street Journal, that the Fed, as main bank regulator, had walloped the bank last year with a “troubled condition” designation, one of the lowest rankings on its five-level scoring system.

The FDIC keeps its “Problem Bank List” secret. It only discloses the number of banks on it and the amount of combined assets of these banks. A week ago, the FDIC reported that in Q1, combined assets on the “Problem Bank List” jumped by $42.5 billion to $56.4 billion (red bars, right scale), the first such surge since 2008, as I mused…  Oops, It’s Starting, Says This Chart from the FDIC:

That increase in assets of $42.5 billion on the “Problem Bank List” nearly matches the assets of Deutsche Bank’s principle subsidiary in the US, Deutsche Bank Trust Company Americas (DBTCA) of $42.1 billion as of March 31. And this has now been now confirmed by the sources: it was DBTCA that ended up on the “Problem Bank List.”

The Fed’s downgrade a year ago of Deutsche Bank’s US operations to “troubled condition” was what apparently nudged the FDIC in Q1 to put the bank on its Problem Bank List. The Fed’s ranking of banks is also a secret – for a good reasons: When these things come out, shares plunge and investors lose what little confidence they have left, as we’re seeing today. This loss of trust can entail larger problems that then coagulate into a self-fulfilling prophesy that perhaps should have self-fulfilled itself years ago.

In addition to the shares sinking to a new low, Deutsche Bank AG’s contingent convertible bonds, one of the instruments with which the German entity has increased its woefully drained Tier 1 capital after the Financial Crisis are now plunging again. The 6% CoCos dropped 3.6% today, to 90.12 cents on the euro. They’re now down 15% from the beginning of the year:

To continue reading: Deutsche Bank CoCo Bonds Plunge, Shares Hit Record Low, after US Entity Makes FDIC’s “Problem Bank List”

German Media Says Merkel Can Not Afford To Bail Out Deutsche Bank, by Tyler Durden

Pity Angela Merkel (just kidding). Deutsche Bank is Germany’s largest bank and a big part of the German economy. It has a huge derivatives exposure and now the US Department of Justice is asking for $14 billion. Merkel and Germany have insisted that southern European nations, particularly Greece and Italy, not bail out their insolvent banks and force depositors and bond holders to share the pain. She has also said that Deutsche Bank will get no government aid. But it’s Deutsche Bank and what happens if depositors start pulling their money? From Tyler Durden at zerohedge.com:

Having kept mostly silent during the past week when Deutsche Bank stock was crashing, its default risk soaring, and only a spurious rumor by French AFP, based on a Twitter report, prevented the bank’s stock from going into a three day weekend at all time lows , on Saturday the German press woke up to the ongoing local banking crisis, reiterating what stoked the crisis in the first place, namely Angela Merkel’s statement last weekend that it won’t bail out Deutsche Bank.

Repeating not only what Merkel herself said last week – a statement which first prompted this week’s plunge in DB stock – but what we have said all along, namely that a bailout of Deutsche Bank would be political suicide for the Chancellor due to pressure from AfD, and may lead to the collapse of Europe, where other nations, namely Italy, have been pushing for a similar bailout of their own banking systems only to be met with stern denials by German, Reuters reports that according to much of the German media, Angela Merkel cannot afford to bail out Deutsche Bank given the hard line Berlin has taken against state aid in other European nations and the risk of a political backlash at home.

Last week’s events, which have prompted numerous flashbacks to that certain historic week in September 2008 when Lehman failed after counterparties yanked cash from the doomed bank, culminated when the German government denied a newspaper report on Wednesday that it was working on a rescue plan for the Germany lender, unleashing a plunge in DB shares, which was accelerated after a Bloomberg report that hedge fund counterparties to DB’s prime brokerage had quietly withdrawn cash from the bank.

Only a so-far unconfirmed and very improbable report on Friday morning that the DOJ is willing to cut the $14 billion penalty to DB by more than half, prevented the stock from plunging further into the Friday close.

And while we wait to find what the real story about the DOJ’s settlement decision is, Germany’s press is already making it clear – once again – that a Deutsche Bank bailout is out of the picture.

As Reuters adds, 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.”

To continue reading: German Media Says Merkel Can Not Afford To Bail Out Deutsche Bank