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Will Deutsche Bank collapse with a fallout worse than Lehmans?

scolairebocht

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Joined
Sep 29, 2006
Messages
934
One commentator on here made the rather interesting point that both parties to the Brexit debate were now looking to the markets to see what happens next. The EU institutions, believing a bit in their own propaganda from project fear, thought that the British stock, currency and housing markets would immediately crash with such a thump that it would send the British back to their senses and demand another referendum, while some in Britain were waiting to see what negative effect this vote would have for the eurozone in the hopes the whole EU would collapse like the USSR before it.

And indeed it is true that sterling has fallen but this in fact might be a good adjustment anyway for an economy that is running a trade deficit. Otherwise the British economy and stockmarket look fairly ok.

Meanwhile back at the EU ranch we see a lot of speculation that the Italian banks, sitting on some 350 or so billion euro in loses, might require a bailout so starting the whole eurozone credit squeeze/panic that we saw before? In fact if you consider it for a minute Brexit is bound to hit cofidence in the euro more than sterling. The former currency is a new one based on some kind of concept of pan european unity, even if only monetary, and the idea of a country leaving the EU after 40 or so years is bound to rattle that confidence?

And we have another giant volcano on the horizon, it turns out that the ginormous Deutsche Bank is looking decidedly shaky these days. Its share price has halved again in a year (down from, I think somebody said, $40 to $12 dollars a share since 2012) and respected commentators like Deutsche Welle are calling it "the downfall of an institution": Opinion: The downfall of an institution | Business | DW.COM | 04.07.2016 .

The figures involved with that bank are amazing. It has a stockmarket valuation of only $19 billion but it claims it has $1.9 trillion of investments so why then does the stock market value it so less than the resale value of its assets? Maybe they just don't believe them or maybe the other liabilities are scaring them off. These other liabilities include 7,800 lawsuits against the bank, some of whom might cost it billions to settle considering that it has fallen out with regulatory institutions as far apart as the US - where it failed their stress tests, again - the UK and Russia.

Also, scarily, it has a nominal liability to derivatives trading of, get this, and this is from their own April 2016 earnings report, $72.8 trillion ( https://www.thestreet.com/story/13628159/1/deutsche-bank-to-initiate-the-next-financial-crisis-stock-could-be-headed-to-zero.html ). So have we just come across the only bank which is both too big to fail but also too big to bail out, hence we are just about to head into a Lehmans style collapse?
 
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Lumpy Talbot

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Joined
Jun 30, 2015
Messages
26,694
Twitter
No
Heh. German bank debt and the only solution is a tin-hatted Heinz. Funny how 1970s boy's comics were so prophetic.
 

eoghanacht

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Joined
Apr 18, 2006
Messages
33,366
You got ripped off on the price! :)
He bought them in 1982, Heinz jaysus, fancy yank beans. Whats wrong with Batchelors!
 

ainm_eile

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Jun 9, 2016
Messages
613
If you look at their balance sheet (annualreport.deutsche-bank.com/2015/q3/consolidated-financial-statements/consolidated-balance), DB has €1.72 trillion of assests and €1.65 trillion of liabilities, leaving just €70 billion net.

So the bank's solvency is very vulnerable to any impairment in asset quality, if its existing assets are overvalued, or adverse shocks happen in the future.

Take for example its €400 billion loan book (annualreport.deutsche-bank.com/2015/q3/management-report/risk-report/asset-quality.html), to cynical Irish eyes it looks very pristine, no? Even if the bank is honest, it's loans are very tied up with the German export machine which is vulnerable in the future. There is a risk that Germans won't be able to service their debts going forward, which would be sufficient to knock a chunk off their assets.
 

storybud1

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Joined
Oct 25, 2011
Messages
6,742
no need to panic, all the new arrivals will be working hard, paying taxes and not be a burden on anyone , ?

Oh yeah Merkel, you fooked up royally,, throughout history when things are looking up that is the time to watch out and don't do anything stooopid.

The German economy must seriously understand that to compete against Asia they cannot be dragging along the rest of Southern Europe in a common currency to suit an ideological idea. I reckon a new Business Eurobit currency will be created, can only be traded online for products between businesses and not be available to the general public.

Don't ask me why , it just feels like there should be a separation of manufactured goods between companies and the rest of the retail/banking/cash economy that usually fooks up everything when they talk up prices and overheat the markets and property section.
 

Catalpast

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Joined
Nov 17, 2012
Messages
26,197
no need to panic, all the new arrivals will be working hard, paying taxes and not be a burden on anyone , ?

Oh yeah Merkel, you fooked up royally,, throughout history when things are looking up that is the time to watch out and don't do anything stooopid.

The German economy must seriously understand that to compete against Asia they cannot be dragging along the rest of Southern Europe in a common currency to suit an ideological idea. I reckon a new Business Eurobit currency will be created, can only be traded online for products between businesses and not be available to the general public.

Don't ask me why , it just feels like there should be a separation of manufactured goods between companies and the rest of the retail/banking/cash economy that usually fooks up everything when they talk up prices and overheat the markets and property section.
IIRC that is the way the Euro started out?
 

Ellen Ripley

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Feb 5, 2014
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6,694

Boy M5

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21,731
No.
 

Catalpast

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Nov 17, 2012
Messages
26,197

Lumpy Talbot

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No
I recall reading back around 2009/2010 that German bank balance sheets were all understated in terms of liabilities because they were allowed to mark down trades in the derivatives via offshore entities as being 'neutral' in their accounts even if they were in reality staring at a major loss.

The implications of that accounting trick are fairly enormous if that is still the case.
 

captain obvious

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Joined
Nov 23, 2012
Messages
1,889
If you look at their balance sheet (annualreport.deutsche-bank.com/2015/q3/consolidated-financial-statements/consolidated-balance), DB has €1.72 trillion of assests and €1.65 trillion of liabilities, leaving just €70 billion net.

So the bank's solvency is very vulnerable to any impairment in asset quality, if its existing assets are overvalued, or adverse shocks happen in the future.

Take for example its €400 billion loan book (annualreport.deutsche-bank.com/2015/q3/management-report/risk-report/asset-quality.html), to cynical Irish eyes it looks very pristine, no? Even if the bank is honest, it's loans are very tied up with the German export machine which is vulnerable in the future. There is a risk that Germans won't be able to service their debts going forward, which would be sufficient to knock a chunk off their assets.
By all accounts they have a huge credit derivative exposure. They are also systemic to the German banking system (as highlighted by a recent IMF country report). If they fail they will probably be bailed out, most likely at our expense.
 

Lumpy Talbot

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Joined
Jun 30, 2015
Messages
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No


So. Did you win the new home? That'd be some irony. The world collapsing around you and the last email you receive is from Heinz congratulating you on winning a new 3 bed semi in the Zombie Quarter.
 

Notachipanoaktree

Well-known member
Joined
Jul 26, 2013
Messages
8,430
One commentator on here made the rather interesting point that both parties to the Brexit debate were now looking to the markets to see what happens next. The EU institutions, believing a bit in their own propaganda from project fear, thought that the British stock, currency and housing markets would immediately crash with such a thump that it would send the British back to their senses and demand another referendum, while some in Britain were waiting to see what negative effect this vote would have for the eurozone in the hopes the whole EU would collapse like the USSR before it.

And indeed it is true that sterling has fallen but this in fact might be a good adjustment anyway for an economy that is running a trade deficit. Otherwise the British economy and stockmarket look fairly ok.

Meanwhile back at the EU ranch we see a lot of speculation that the Italian banks, sitting on some 350 or so billion euro in loses, might require a bailout so starting the whole eurozone credit squeeze/panic that we saw before? In fact if you consider it for a minute Brexit is bound to hit cofidence in the euro more than sterling. The former currency is a new one based on some kind of concept of pan european unity, even if only monetary, and the idea of a country leaving the EU after 40 or so years is bound to rattle that confidence?

And we have another giant volcano on the horizon, it turns out that the ginormous Deutsche Bank is looking decidedly shaky these days. Its share price has halved again in a year (down from, I think somebody said, $40 to $12 dollars a share since 2012) and respected commentators like Deutsche Welle are calling it "the downfall of an institution": Opinion: The downfall of an institution | Business | DW.COM | 04.07.2016 .

The figures involved with that bank are amazing. It has a stockmarket valuation of only $19 billion but it claims it has $1.9 trillion of investments so why then does the stock market value it so less than the resale value of its assets? Maybe they just don't believe them or maybe the other liabilities are scaring them off. These other liabilities include 7,800 lawsuits against the bank, some of whom might cost it billions to settle considering that it has fallen out with regulatory institutions as far apart as the US - where it failed their stress tests, again - the UK and Russia.

Also, scarily, it has a nominal liability to derivatives trading of, get this, and this is from their own April 2016 earnings report, $72.8 trillion ( https://www.thestreet.com/story/13628159/1/deutsche-bank-to-initiate-the-next-financial-crisis-stock-could-be-headed-to-zero.html ). So have we just come across the only bank which is both too big to fail but also too big to bail out, hence we are just about to head into a Lehmans style collapse?
WADR who gives a sh*it. The sooner the whole mucky mess comes to an end the better. We'll be fine and we'll deal with whatever is the fallout, just as long as you take the dirty 'scum' neo-liberals with you when you go. We know there will always be dirty neo-liberals to grab at the spoils, but next time we'll know what to look for.

Without people there is no market. Without neo-liberals 'scum' everybody has a good prospect of an ok life.


Neoliberalism, the absurd idea of economic government based solely on the market and its ability to self-regulate.

I cannot imagine either symbolically or in fact anything more racist or classist than to import hundreds of thousands of unskilled workers into ones country for the purpose of working as cheap labour.

Why are we getting shagged to death with Social Dumping while France gets to pick and choose the EU Directives it will abide by. WTF is going on.
 
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gerhard dengler

Well-known member
Joined
Feb 3, 2011
Messages
47,552
One commentator on here made the rather interesting point that both parties to the Brexit debate were now looking to the markets to see what happens next. The EU institutions, believing a bit in their own propaganda from project fear, thought that the British stock, currency and housing markets would immediately crash with such a thump that it would send the British back to their senses and demand another referendum, while some in Britain were waiting to see what negative effect this vote would have for the eurozone in the hopes the whole EU would collapse like the USSR before it.

And indeed it is true that sterling has fallen but this in fact might be a good adjustment anyway for an economy that is running a trade deficit. Otherwise the British economy and stockmarket look fairly ok.

Meanwhile back at the EU ranch we see a lot of speculation that the Italian banks, sitting on some 350 or so billion euro in loses, might require a bailout so starting the whole eurozone credit squeeze/panic that we saw before? In fact if you consider it for a minute Brexit is bound to hit cofidence in the euro more than sterling. The former currency is a new one based on some kind of concept of pan european unity, even if only monetary, and the idea of a country leaving the EU after 40 or so years is bound to rattle that confidence?

And we have another giant volcano on the horizon, it turns out that the ginormous Deutsche Bank is looking decidedly shaky these days. Its share price has halved again in a year (down from, I think somebody said, $40 to $12 dollars a share since 2012) and respected commentators like Deutsche Welle are calling it "the downfall of an institution": Opinion: The downfall of an institution | Business | DW.COM | 04.07.2016 .

The figures involved with that bank are amazing. It has a stockmarket valuation of only $19 billion but it claims it has $1.9 trillion of investments so why then does the stock market value it so less than the resale value of its assets? Maybe they just don't believe them or maybe the other liabilities are scaring them off. These other liabilities include 7,800 lawsuits against the bank, some of whom might cost it billions to settle considering that it has fallen out with regulatory institutions as far apart as the US - where it failed their stress tests, again - the UK and Russia.

Also, scarily, it has a nominal liability to derivatives trading of, get this, and this is from their own April 2016 earnings report, $72.8 trillion ( https://www.thestreet.com/story/13628159/1/deutsche-bank-to-initiate-the-next-financial-crisis-stock-could-be-headed-to-zero.html ). So have we just come across the only bank which is both too big to fail but also too big to bail out, hence we are just about to head into a Lehmans style collapse?
Great post.

Deutsche Bank (DB) share value has fallen by 50% since the start of this year. If confidence correlates to the share value price then confidence in DB is diminishing.

DB is the biggest trader in derivatives in the banking sector.
DB's argument is that the derivative trading liability value ($72 trillion) is offset by the derivative trading asset value.
In other words, 72 trillion figure owed by others by DB is balanced by a similar figure owed to DB.

A derivative is financial instrument derived from another transaction.

So a derivative could be a financial instrument based on a mortgage loan made to a borrower, a derivative could be a financial instrument based on a car loan made to a borrower. In other words, the ability of the borrower to service the loan, that speculation is the basis of the derivative.

The real nub of this issue is - on what basis has DB derived it's derivative trading asset value?

If the derivative trading asset value is based on assets which won't realise their nominal value, then the gap between DB's derivative trading liability value ($72 trillion) and it's derivative trading asset value is bigger.
And this gap has to be met by more capital.
 
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