Remember when I told you Deutsche Bank was the canary in the coal mine for Europe?
Remember when I wrote that Deutsche Bank was at the heart of taking down the Italian banking system?
Well those two scenarios are playing out this week. Deutsche Bank reported “earnings” Wednesday and profits fell 98% in the quarter compared to same quarter last year.
CEO Jon Cryan, who has seen the banks share price plummet 44% since taking over last year said, “If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring,” on Wednesday.
Shares are trading at $13.50 in US pre-market.
Now, for the Italian banks, Monte Paschi, the third largest bank is on the brink of insolvency. The Italian government has until Friday to come up with a plan to buy some $500B in toxic assets on its balance sheets.
The EU and IMF say that bondholders have to be hurt first with a massive haircut on the value of their bonds, before a bailout can be secured. However, Monte Paschi, the Siena-based bank, issued bonds to customers so they would not pull their money earlier this year.
So the Italian government is saying that these bondholders were not sophisticated enough to know the perils of their investment and should not be harmed by the regulation.
Either way the bank is teetering on debt taken on by a fraudulent takeover of another Italian bank, which was brokered by Deutsche Bank and an answer must be found before the end of the month.
This merger deal back in 2010 or so, is the backbone of my investigation into the Bankers’ Suicide series that ran in The New York Post.