Tag Archives: Deutsche Bank

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

Posted on May 31, 2018 | Leave a comment

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”

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

Posted on October 2, 2016 | Leave a comment

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

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A World of Problems, by The ZMan

Posted on September 30, 2016 | Leave a comment

Europe is facing a banking crisis, a reappearance of Greece’s financial crisis, and a crisis in Syria. Hold on to your hats. From The Zman at theburningplatform.com:

Back when the Germans were threatening to shut down Greece and sell it off for parts, it was fairly obvious that there was no way to “fix” the Greek problem. Even it were possible to radically overhaul their public sector, the debt payments are too high to maintain the level of social services expected from a modern social democracy. Default was unthinkable because close to 80 percent of Greece’s public debt is owned by public institutions, primarily the EU governments and the ECB.

The “solution” was to kick the can down the road until a miracle happened, but now the problem is back.

ATHENS—Greece’s economic recovery is proving elusive, challenging the forecasts of the country’s government and foreign creditors still counting on growth reviving this year.

The International Monetary Fund said last week that the economy is stagnating, in the first admission from creditors that Greece’s recovery is off track again. Growth will only restart next year, the head of the IMF’s team in Greece said on a conference call with reporters, without offering details.

Of particular concern is that exports, which are supposed to lead Greece out of trouble, are on a slow downward trajectory, hampered by capital controls, taxes and a lack of credit.

“There is no chance we will see a rebound unless we see some bold political decisions that would introduce a more stable business environment,” said Dimitris Tsakonitis, general manager at mining company Grecian Magnesite.

The bailout agreement between Greece and its German-led creditors assumes rapid growth from late 2016 onward, including an official forecast of 2.7% growth in 2017. Private-sector economists believe next year’s growth could be closer to 0.6%.

Weaker growth would undermine the budget, likely leading to fresh arguments with lenders about extra austerity measures.

Greece is still grappling with the measures it has already agreed to. Late on Tuesday the country’s parliament approved pension overhauls and other policy changes that have been delayed for months, holding up bailout funding.

Greek government officials are sticking to their view that the economy is on the cusp of growth. “We are at the turning point at which we can we say with certainty that we are leaving the recession behind us,” Economy Minister George Stathakis told supporters of the ruling left-wing Syriza party Sunday.

The economy will get a push from investors as of the end of the year, when lenders are expected to provide some debt relief and the country qualifies for a European Central Bank bond buyback program, Prime Minister Alexis Tsipras said in an interview with The Wall Street Journal last week.

In other words, the miracle did not happen and the problem is now worse. This comes at a time when Europe’s biggest bank is in very serious trouble.

To continue reading: A World of Problems

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I’m in Awe of How Fast Deutsche Bank is Falling Apart, by Wolf Richter

Posted on September 29, 2016 | Leave a comment

Deutsche Bank is circling the drain. If it doesn’t get a government back-up, it probably will not survive. From Wolf Richter at wolfstreet.com:

Counterparties lose confidence, withdraw cash.

Deutsche Bank, with $2 trillion in assets, amounting to 58% of Germany’s GDP, one of the most globally interwoven banks, with gross notional derivatives exposure of €46 trillion, right at the top along with JP Morgan (booked as €41 billion in derivative trading assets after netting and collateral) – this creature of risk and malfeasance, is finally starting to scare its counterparties.

This is how Lehman came unglued. Slowly and then all of a sudden.

Bloomberg News today:

[S]ome funds that use the bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Millennium Partners, Capula Investment Management, and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, said a person familiar with the situation….

So far, these are just the first of Deutsche Bank’s 200 hedge-fund clients that use it to clear their derivatives transactions. Banking is a confidence game. When confidence sags, the whole construct comes tumbling down. And the first movers have a big advantage in getting their cash out in in time. Bloomberg:

Clients review their exposure to counterparties to avoid situations like the 2008 collapse of Lehman Brothers Holdings Inc. and MF Global’s 2011 bankruptcy when hedge funds had billions of dollars of assets frozen until the resolution of lengthy legal proceedings.

As the leak ricocheted around the world, Deutsche Bank shares plunged 6.6% in late trading today in Frankfurt to €10.25, having been down 8% at one point earlier. Shares are at the lowest level since they started trading on the Xetra exchange in 1992. They’re down 68% from April 2015. Just before the financial Crisis, they briefly traded at over €100 a share. By that measure, they’re down over 90%!

This comes after a 7.6% plunge on Monday. That rout was initiated Friday afternoon when Aunt Merkel, fretting about the general elections in the fall of 2017, informed voters via a leak that she had told CEO John Cryan in a “confidential meeting” that state aid was “categorically” out of the question.

Merkel’s popularity has recently taken a hit, and a big, immensely unpopular taxpayer bailout of bank stockholders and bondholders could cost her the election. The onslaught of contradictory denials that this episode has produced was a sight to behold.

So Tuesday, shares took a breath; Wednesday, they rose 2%; and today by mid-afternoon, they rose another 1% to €10.87, as falling knife-catchers were grabbing what they could, before all heck broke loose again.

Deutsche Bank’s market capitalization has shriveled to €14 billion ($15.7 billion), a few bad trading days away from the $14 billion in fines that the US Department of Justice wants in order to settle the allegations surrounding Deutsche Bank’s residential mortgage-backed securities that blew up during the Financial Crisis.

Deutsche Bank isn’t getting singled out. US Banks have already settled their RMBS allegations: Bank of America for $16.7 billion, JP Morgan for $9 billion, Citigroup for $7 billion, Goldman Sachs for $5 billion, and so on. They all settled for less than the original amount. Deutsche Bank will be able to settle for less as well. But its problem isn’t just the Department of Justice.

To continue reading: I’m in Awe of How Fast Deutsche Bank is Falling Apart

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The Loophole for Deutsche Bank’s Bailout: Game almost Over? by Don Quijones

Posted on September 29, 2016 | Leave a comment

SLL agrees with the premise of this article: the powers that be in Germany and Europe are frantically looking for a legal loophole that will allow the German government to bail out Deutsche Bank and it’s almost a foregone conclusion that they’ll find one. From Don Quijones at wolfstreet.com:

Everyone is denying everything.

Judging by the slow-motion meltdown of a growing number of large banks in Europe, including Deutsche Bank (in the IMF’s words, the “world’s most important net contributor to systemic risks”), confidence in their solvency is evaporating. And the denial and blame games have begun.

Deutsche Bank CEO John Cryan denied any need to raise capital or ask for a bailout. That was followed by furious denials from Mario Draghi that the ECB’s low rates are partly responsible for Deutsche Bank’s current woes. Roughly half of all of Deutsche’s profits have traditionally come from loan interest; now, thanks to the madcap negative-interest-rate policies, that source of income is disappearing.

But the bank’s spectacular fall from grace — it has lost 90% of its market value since 2007 — is primarily owed to woeful, often criminal mismanagement. Hence, all the fines. As the WSJ’s Paul J Davies writes:

The bank faces all the problems that plague its peers, but it has most of them worse than rivals. Its costs are among the highest, its balance sheet among the most bloated and its longer-term profitability one of the least attractive.

Lies, Damned Lies and Contradictions

Things are so serious and the denials are flowing so thick and fast that many of the main players are contradicting each other — and sometimes even themselves — at just about every turn.

According to Draghi, Deutsche Bank is no longer “systemically important,” despite being assigned that exact same label by the BIS Financial Stability Board, the shadowy group of international financial bodies, finance ministries and central bankers that compiles the list of global systemically important financial institutions (G-SIFIs), in the process enshrining failure as the cornerstone of financial industry success. Its first ever list, which included Deutsche Bank, was published in November 2011, when the board’s chairman was… Mario Draghi.

As for the head of the IMF, Christine Lagarde, she proffered a wildly different take, telling CNBC that Deutsche Bank is a systemic important player in the global financial system, but “is on a solid base currently, and we are not at a stage in which I see the need for a government intervention.”

You can expect that opinion to change significantly in the coming days or weeks, as will Merkel’s dogged insistence that the EU’s Bank Recovery and Resolution Directive (BRRD) — which requires an 8% bail-in of a bank’s creditors, including very large foreign banks and hedge funds — be applied before taxpayers get put on the hook.

This was the line she held to steadfastly throughout the early months of Italy’s banking meltdown. In a recent interview she ruled out any state assistance for Deutsche Bank. A state-financed rescue could be a political liability for Ms. Merkel should she decide to run again in next year’s general election. But with Deutsche Bank’s assets amounting to 58% of Germany’s GDP, Merkel will not allow the bank to collapse. The damage to the German economy would be too enormous.

To continue reading: The Loophole for Deutsche Bank’s Bailout: Game almost Over?

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German Politicians Are Getting Nervous About Deutsche Bank, by Tyler Durden

Posted on September 23, 2016 | 3 comments

In the over-leveraged and interconnected global financial system, if German politicians are getting nervous about systemically important Deutsche Bank, the rest of us should be nervous about everything else. It may only take problems at one big bank to bring the whole thing down. From Tyler Durden at zerohedge.com:

Just a few short days after Germany’s premier financial publication Handelsblatt dared to utter the “n”-word, when it said that in the aftermath of last week’s striking $14 billion DOJ settlement proposal, “some have even raised the possibility of a government bailout of Germany’s largest bank, which would be a defining event and a symbolic blow to the image of Europe’s largest economy”, German lawmakers are finally starting to get nervous.

According to Bloomberg, Deutsche Bank’s suddenly troubling finances, impacted by the bank’s low profitability courtesy of the ECB’s NIRP policy as well as mounting legal costs courtesy of years of legal violations, “are raising concern among German politicians.” At a closed session of Social Democratic finance lawmakers on Tuesday, Deutsche Bank’s woes came up alongside a debate over Basel financial rules. Participants discussed the U.S. fine and the financial reserves at Deutsche Bank’s disposal if it had to cover the full amount.

While the participants in the meeting did not reach any conclusions on the likely outcome, the discussion signals that the risks facing Deutsche Bank have the attention of Germany’s political establishment. Which means it’s almost serious enough where the politicians, in the parlance of Jean-Claude Juncker, “have to lie” or in this case redirect attention, ideally abroad: the German Finance Ministry last week called on the U.S. to ensure a “fair outcome” for Deutsche Bank, citing cases against other banks where the government settled for reduced fines.

Actually lying also works: on February 9 German Finance Minister Wolfgang Schaeuble told Bloomberg Television that he has “no concerns about Deutsche Bank.” That has probably changed.

The solvency problems facing Germany’s biggest bank have been widely documented: it is already ranked among the worst-capitalized lenders in European stress tests before U.S. authorities demanded $14 billion as an RMBS settlement, more than twice the €5.5 billion the bank has set aside for litigation and almost 80% of the bank’s market cap. Also, as we pointed out first in 2013, and as Matteo Renzi takes every chance to remind Germany, Deutsche Bank has a gargantuan €42 trillion in gross notional derivatives on its balance sheet. Just this week, the Italian PM told Bundesbank chief Jens Weidmann not to worry so much about Italy’s massive debt load but instead to solve the problems of German banks which had “hundreds and hundreds and hundreds of billions of euros of derivatives” on their books.”

But what may be most troubling is not what German politicians are talking about behind closed door, but what they are not talking about in public. Bloomberg notes that Merkel’s government is now maintaining a public silence on Deutsche Bank’s woes. Then again, what is there to say: if DB is indeed approaching the cliff, any discussion of the bank would only lead to more concerns about the bank’s viability. There was some discussion of DB, however, during a September 16 meeting of Germany’s Financial Stability Committee, a group of German finance officials and regulators, whose members concluded that the fine demanded by the U.S. government would probably be lowered, Handelsblatt newspaper reported. In other words, hope is once again a strategy. Sadly, when it comes to banks with multi-trillion balance sheets, this may not be the best approach.

To continue reading: German Politicians Are Getting Nervous About Deutsche Bank

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A note on Deutsche Bank, by Golem XIV

Posted on September 21, 2016 | Leave a comment

Deutsche Bank is the most important bank in Germany, and between bad loans and derivatives exposures, it is not in good shape. It has lost 90 percent of it share value since 2007. If it goes down, will the German government bail it out and stand exposed as a complete hypocrite, having insisted that other European governments couldn’t bail out their banks? Or will it let Deutsche Bank fail, and take Germany’s, and perhaps Europe’s, economy and financial markets with it? From Golem XIV at golemxiv.co.uk:

Deutsche Bank, one of Europe’s behemoths, is in very deep trouble having lost 90% 0f its share price value since 2007, has been falling sharply all this last year (48% loss this year) and, with its $42 Trillion in Derivatives exposure was singled out by the IMF, as the bank which ,

“appears to be the most important net contributor to systemic risks…”

Of course Deutsche agues the standard ‘derivatives-aren’t-a-problem’ line, that this 42 trillion all nets out and their real exposure is a fraction of that vast figure. Which is fine as long as you think that in the event of Deutsche coming unstuck, 42 trillions-worth of derivatives contracts can be held in abeyance for the time it would take for all those contracts to be netted out. As I’ve said before netting out is akin to getting a rowing boat full of people to all change places without the boat overturning.

And now Deutsche has been threatened by the US DoJ with a $14 billion fine for its crimes for selling knowingly over-valued RMBS (Residential Mortgage Backed Securities) in the build up to the financial crash of 2007.

Deutsche cannot pay $14 billion without raising a great deal of cash. Deutsche has put aside $5.5 billion for paying fines. A mere 9 billion short. So could Deutsche go down? Financially yes it could. But politically, I doubt it. And it’s the tension between these two answers, between the parlous financial state and the huge political significance of Deutsche, that I find interesting.

Deutsche is Germany’s only G-SIB (Global Systemically Important Bank). Deutsche is Germany’s financial flag carrier. It stands at the centre of Germany’s long held desire to have Frankfurt eclipse London as Europe’s financial centre. Although Germany also has Allianz as a G-SII (Global systemically Important Insurer), without Deutsche Bank Germany ceases to be a globally significant financial nation (G-SFN – OK I made that one up). Without Deutsche Germany would not sit at the top table of global finance. France would. France has three G-SIBs. The balance between France and Germany within Europe would shift. Maintaining that balance between France and Germany, at the heart of Europe, has been critical in European affairs since WWI.

Could Germany ever allow Deutsche Bank to go under?

Officially the global framework for G-SIFI resolution in bankruptcy has been laid down by the FSB and agreed by all. And interestingly, though they are touted as the result of new thinking since the financial crisis, they are not. I recently received an EU document marked ‘Secret’, entitled “Overview of Financial Stability Resolution Issues” and dated Feb 2008 which describes pretty much what the FSB has now settled upon now. I mention this because almost every word in it was completely ignored once the crisis hit and each country viewed the imminent demise of their major, flag-carrying banks. Which leads me to wonder why I should believe it would be any different next time? I think this question is particularly critical to Germany because Deutsche is its only G-SIB. In the next massive implosion of debts, France could afford to let one of its G-SIBs go down and still have two seats at the top table. England could do the same.

To continue reading: A note on Deutsche Bank

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Why A Deutsche Bank Whistleblower Turned Down A $8.25 Million Reward: In His Own Words, by Tyler Durden

Posted on August 19, 2016 | Leave a comment

At first blush his is a fairly routine story about shoddy bank accounting and the revolving door between the regulators and the regulated in the banking industry, but it is lifted way above the mundane by the principled stand of Eric Ben-Artzi, who refused a multimillion dollar whistleblower reward. From Tyler Durden at zerohedge.com:

At the height of the financial crisis, when risk assets were imploding and counterparties were in danger of overnight collapse, Deutsche Bank avoided failure and nationalization by fabricating the value of its $130 billion derivative portfolio of “leveraged super senior” trades.

Some history: back in 2005, these trades were seen as “the next big thing” in the world of credit derivatives, something which DB at the time was building a massive position in. They were designed to behave like the most senior tranche of a typical collateralised debt obligation, where assets such as mortgages or credit default swaps are pooled to give investors varying degrees of risk exposure. Deutsche became the biggest operator in this market, which involved banks buying insurance against the possibility of default by some of the safest companies, the FT writes.

There was just one problem: when it was building up its portfolio, Deutsche never accounted for the possibility of the financial world nearly collapsing. Which is why as the illiquid portfolio was careening, instead marking it to market – an act that would have resulted in the bank’s insolvency – DB’s risk managers misstated the value of the positions by anywhere from $1.5bn to $3.3bn.

Several years later, in 2012, the SEC found out about this, and in 2015 slapped a $55 million fine on Deutsche Bank for this criminal fabrication (nobody went to jail). “At the height of the financial crisis, Deutsche Bank’s financial statements did not reflect the significant risk in these large, complex illiquid positions,” said Andrew Ceresney, director of the SEC’s enforcement division. “Deutsche Bank failed to make reasonable judgments when valuing its positions and lacked robust internal controls over financial reporting.”

The reason why the SEC learned about DB’s massive mismarked derivative exposure, is because two former employee whistleblowers, Matthew Simpson and Eric Ben-Artzi, told it: the duo alleged that if Deutsche had accounted properly for its positions, its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bailout to survive. The highest estimate for the unaccounted loss was $12bn. Which explains why Deutsche Bank was desperate to manipulated the numbers.

End result: DB got its wristslap with a token fine, the SEC came out looking like it knew what it was doing, and – as we learned today – the two whistleblowers got major awards for helping the SEC collected the $55MM fine, amounting to 15% each.

Only, something unexpected happened: as the FT writes, one of the whistleblowers who helped expose the false accounting at Deutsche Bank turned down a multimillion-dollar award from the Securities and Exchange Commission in protest against the agency’s failure to punish executives at the bank.

Eric Ben-Artzi, the former Deutsche risk officer, told the SEC he is declining his share of a $16.5 million payout — the third largest in the whistleblower program’s history — which represents 30% of the $55 million Deutsche Bank fine.

But why turn down enough money that most people, even ex-Wall Streeters, could comfortably retire on? Ben-Artzi said the fine should be paid by individual executives, not shareholders, and suggested the “revolving door” of senior personnel between the SEC and Germany’s largest bank had played a role in executives going unpunished (understandably he had no comment about the spike in Deutsche Bank suicides in 2013-2014, particularly those emanating from its legal department).

To continue reading: Why A Deutsche Bank Whistleblower Turned Down A $8.25 Million Reward: In His Own Words

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I’m in Awe at How Fast Deutsche Bank is Coming Unglued, by Wolf Richter

Posted on July 7, 2016 | Leave a comment

Many of Europe’s banks are sick, and none are sicker than Deutsche Bank, the pride of the German banking industry. Wolfe Richter’s article here is good as far as it goes, but he fails to mention Deutsche Bank’s derivatives book, the world’s largest at an estimated $60 trillion. From Richter at wolfstreet.com:

Deutsche Bank – “the most important net contributor to systemic risks,” as the IMF put it last week after a lag of several years – is having a rough time. Shares dropped 4.2% today to close at a new three-decade low of €11.63, down 48% since July 31 last year, lower even than the low during the doom-and-gloom days of the euro debt crisis and the Global Financial Crisis.

It’s not the only European bank in trouble. Credit Suisse dropped 1.7% today to CHF 9.92, another multi-decade low, down 63% since July 31. Other European banks are getting mauled too. The European Stoxx 600 banking index dropped 3% today to 117.69, approaching the Financial Crisis low of March 2009.

If July 31, 2015, keeps showing up, it’s because this was the propitious day when Draghi’s harebrained experiment with negative interest rates and massive QE came unglued, when European stocks, and particularly European bank stocks began to crash.

Deutsche Bank is so shaky that German Finance Minister Wolfgang Schäuble found it necessary to stick his neck out and explain to Bloomberg in February that he has “no concerns about Deutsche Bank.” Finance ministers don’t say this sort of thing about healthy banks.

At the time, CEO John Cryan – whose main job these days is propping up Deutsche Bank with his rhetoric – explained ostensibly to frazzled employees that the bank’s position was “absolutely rock-solid, given our strong capital and risk position.”

Days later, he followed up his rhetoric with a stunning ruse: On February 12, the bank announced that it would buy back $5.4 billion of its own bonds, including some issued only a month earlier.

“The bank is using market conditions to buy back these bonds at attractive prices and to cut debt,” CFO Marcus Schenck said at the time. “By buying them back below their issuance value, the bank is making a profit. The bank is also using its financial strength to provide liquidity to bond investors in a difficult market environment.”

Shares soared 12% on the spot! Its bonds rocketed higher. Even its contingent convertible bonds, the infamous CoCo bonds, though they weren’t part of the buyback plan, bounced. For example, its €1.75 billion of 6% CoCo notes soared from a record low of 70 cents on the euro on February 9 to 87 cents by March – a 24% move!

The ruse had worked! During the miracle rally, short sellers got their heads handed to them.

But it was one of the silliest, most desperate ways to prop up shares and bonds. And now the bond-buyback miracle-nonsense rally has collapsed, with shares at a new multi-decade low, and with bonds swooning.

To continue reading: I’m in Awe at How Fast Deutsche Bank is Coming Unglued

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German Finance Minister Joins DB CEO, Says “Not Worried About Deutsche Bank” by Tyler Durden

Posted on February 10, 2016 | Leave a comment

From Tyler Durden at zerohedge.com:

With Deutsche Bank credit risk exploding and stock price collapsing to record lows, despite the CEO’s “rock solid” affirmations, there is only one way to know just how real a crisis this is… when government officials issue ‘denials’.

German Finance Minister Wolfgang Schaeuble says he isn’t worried about Deutsche Bank.

“No, I have no concerns about Deutsche Bank,” Schaeuble says
Schaeuble comments to Bloomberg Television after press conference in Paris.

We suspect this is Schaeuble’s “Contained” moment as markets – the ultimate arbiter of truth – tell a very different story…

So when does Schaeuble get “concerned?”

http://www.zerohedge.com/news/2016-02-09/german-finance-minister-joins-db-ceo-says-not-worried-about-deutsche-bank

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