Look, you may see some people commenting on Deutsche Bank and the parallels to Lehman Bros. But I wrote this back in September 2015.
There were all the tell-tale signs that the global German bank had overextended itself in too many markets and how even if 10% of its derivative book went bad, then the bank was too illiquid to survive.
Well between negative interest rates on sovereign debt and now Brexit, the bank is headed for a fall. At its peak the bank carried a derivative book of some $60 trillion in value.
So using a 10% figure for bad bets, puts the bank on the hook for $6 trillion payout, just a quick conservative back of the envelope math.
This is the primary reason you saw central banks pour over $1 trillion liquidity into the market post-Brexit.
But after the initial high of that heroin fix, now global markets are experiencing withdrawals (not only in capital) but in needing a new injection to stay liquid.
Deutsche’s stock is down more than 91% from its highs in 2007. It sets a new all-time low every time an opening bell rings in a global stock exchange and its third management team since the 2008 crisis can’t stem the tide of a faltering balance sheet, where legal costs soar and revenues craters.
Current CEO John Cryan has a year under his belt and I’m sure his tenure will end by the fall.
My reporting on the bank details much of the “criminal” and civil activities that happen after 2000. Each week for the past year it seems some global financial regulator has taken its pound of flesh out of Deutsche Bank. The bank has admitted through words and actions to rigging some of the largest financial markets in the world. Gold and silver pricing, Libor and Euribor are just a few of the markets.
It fired its board-level legal eagle because he was admitting to too many crimes and misdemeanors.
The bank’s stock in the US is set to open at $12.70 — a new all-time low — down 5.3%. Europe’s major indices are down a little less than half of that on a percentage basis with Italian stocks down the most at 2.4%
If the Italian banks — including Monte Paschi, which I’ve written about here and here with its connection to Deutsche Bank — suffer a failure, which seems to be in the cards, then Germany and the world financial markets will have its Lehman Bros. moment.
It’s very curious that German leader Angela Merkel came out so strongly late last week against the Italian government’s plan to recapitalize the ailing banking system. Did she not realize that the Italian government was giving Deutsche Bank a back-door bailout with the money?
Some one wrote yesterday that the artwork Deutsche Bank owns is worth more than its book value. I find that hard to believe, but I’m sure most of that art came to the bank during WWII so we don’t even know if the bank owns it. Deutsche Bank has been a troubled institution a lot longer than many realize.