How Dangerous Is Deutsche Bank To Stability?

[finehoe]

Deutsche Bank is starting to resemble the financial basket case that Citigroup became in 2008, leading to Citigroup's partial ownership by the U.S. government for a time and the bank requiring the largest taxpayer bailout in U.S. financial history. Citigroup's teetering condition and its interconnectedness to other mega banks played a critical role in the Wall Street crash and collapse of the U.S. economy.

That Deutsche Bank (which is highly interconnected to other major Wall Street banks and locked and loaded with tens of trillions of dollars in derivatives) is now showing the same kind of stresses as Citigroup back in 2008.

On this date a year ago, Deutsche Bank's stock closed at $34.88. Its share price at the open this morning on the New York Stock Exchange was $12.56, a loss of 64 percent in one year's time. But from June 1 of 2007, prior to the onset of the financial crisis, Deutsche Bank has lost a whopping 90 percent of its share value, right on par with Citigroup.

As of this morning's open, Deutsche Bank has a measly $17.32 billion in equity capital versus a portfolio of derivatives amounting to just shy of $50 trillion notional (face amount) as of December 31, 2015.

Yesterday it was announced that Deutsche Bank (and Credit Suisse) would be dropped from an index of the top blue chip stocks in Europe, the Stoxx Europe 50 Index. Citigroup was yanked from the Dow Jones Industrial Average on June 8, 2009 in the midst of the financial crisis.

In June, the International Monetary Fund (IMF) issued a report on the "Financial System Stability" of German financial institutions and what potential systemic impact one blowing up might have on other domestic German banks and insurers as well as financial stability in other countries. The report found that spillover effects would not just impact Germany but also be felt in France, the U.K. and the U.S.

The report called out Deutsche Bank as "the most important net contributor to systemic risks."

http://wallstreetonparade.com/2016/08/is-deutsche-bank-as-dangerous-to-financial-stability-as-citigroup-was-in-2008/

[FlaBoy]

They failed the stress test 

They literally could collapse Europe if they fall apart, which would collapse the world economy. Germany will have to bail itself out but the question is whether they have enough money to even accomplish that with the staggering debt of many European countries that Germany has propped up with the euro while giving Germany the opportunity to kill with exports.

Dangerous times right now for much of the world.

[spuwho]

Deutsche Bank is more like Lehman Bros. in format than Citigroup.

Citi at least had a retail banking operations that provided a stable float until their investments could unwind.

The German Finance Minister has said Deutsche is solid, but with no retail assets to provide short term liquidity, their stock is going to take a beating until they finish shedding some debt.

I wouldnt cry humpty dumpty just yet, but rational minds need to stay in place. It may take 2 or 3 years for them to sort it out.

[fsquid]

They failed the stress test 

many think the latest rounds of the test for the American banks was a joke also.

[BennyKrik]

you just wish you could work there

[spuwho]

you just wish you could work there

Yeah, because they have an Ecar charger.

[Gunnar]

Deutsche Bank is more like Lehman Bros. in format than Citigroup.

Citi at least had a retail banking operations that provided a stable float until their investments could unwind.

The German Finance Minister has said Deutsche is solid, but with no retail assets to provide short term liquidity, their stock is going to take a beating until they finish shedding some debt.

I wouldnt cry humpty dumpty just yet, but rational minds need to stay in place. It may take 2 or 3 years for them to sort it out.

Actually, they do have considerable retail banking in Europe. They did try their best to get rid of the retail clients a couple of years ago (not sexy, not making us money) but after the Acquisition of the Postbank in Germany they do have quite a few.

IMHO, the problems started with idiot management and the purchase of Morgan & Greenfell. The investment banking part has been poisoning and plundering DB from within.

Before that they were a solid bank with many retail clients and strong industry financing / ties and investment (actual investment, not the gambling that is called "investment banking" nowaday).

[spuwho]

Deutsche Bank is more like Lehman Bros. in format than Citigroup.

Citi at least had a retail banking operations that provided a stable float until their investments could unwind.

The German Finance Minister has said Deutsche is solid, but with no retail assets to provide short term liquidity, their stock is going to take a beating until they finish shedding some debt.

I wouldnt cry humpty dumpty just yet, but rational minds need to stay in place. It may take 2 or 3 years for them to sort it out.

Actually, they do have considerable retail banking in Europe. They did try their best to get rid of the retail clients a couple of years ago (not sexy, not making us money) but after the Acquisition of the Postbank in Germany they do have quite a few.

IMHO, the problems started with idiot management and the purchase of Morgan & Greenfell. The investment banking part has been poisoning and plundering DB from within.

Before that they were a solid bank with many retail clients and strong industry financing / ties and investment (actual investment, not the gambling that is called "investment banking" nowaday).

Too many IB's looking for home runs instead of singles and doubles. If these guys cant get a handle on their risk culture we will see Glass Steagal again.

[finehoe]

Glass-Steagal served the country well for 60 years. Curious why you think reinstating it would be a bad thing.

[blfair]

Daily Record: Deutsche Bank should reach 2,800 jobs [in jax]

[mtraininjax]

DB is not going anywhere in the short term. After the stress test, a group of US banks have made a pitch to invest into many Italian banks. You will see the strong dollar come into play against the Euro in all cases. DB will get infusion from other US banks, even the IMF, again, too big to fail comes into play here, there is no way that the world's largest economic players will allow DB to fail. The US will come to the rescue of Germany, once again.

If it were to fail, it would be more catastrophic than Brexit, and would lead to the almost immediate end of the Euro as Germany is the main driver of the Euro.

[FlaBoy]

DB really is too big to fail. If they were to go down, then Europe would collapse, and most of the world economy. However, it shows the precarious situation that the world economy is in after years of bail outs and cash infusions. Europe is not in good shape economically. But then again neither is Russia, China, or South America. We look absolutely peachy over here in comparison.

[mtraininjax]

DB really is too big to fail. If they were to go down, then Europe would collapse, and most of the world economy. However, it shows the precarious situation that the world economy is in after years of bail outs and cash infusions. Europe is not in good shape economically. But then again neither is Russia, China, or South America. We look absolutely peachy over here in comparison.

Don't forget Japan, where the government has done just about everything it can to fix the economy there and nothing has worked. Now faced with Negative Interest rates on bonds, they have to wait for youth to grow their way out. Japan has the oldest population of any country and it shows how dangerous and unstable a country can become if it fails to populate and grow its way into the future.

China is a hoot, they devalue their own currency just to make sure their people can afford to buy goods. In this global economy where paper currencies are manipulated more than a Bill Clinton dating resume, one thing is for sure, we could all use some more metal currency in our financial diets.

[finehoe]

Don't forget Japan, where the government has done just about everything it can to fix the economy there and nothing has worked.

Not true.  Compared with past efforts to revive Japan, Abenomics has achieved a great deal. It has defeated core deflation (excluding energy prices); lifted companies' profits and dividends; expanded employment, especially among women and the old (their economy is essentially at full employment).

[mtraininjax]

If you call an economy growing at 0.5% impressive, well then, we have a difference in opinion. Japan's growth next year, a huge bump up to 0.7%. All from government stimulus.

http://www.focus-economics.com/countries/japan

http://www.bloomberg.com/graphics/2016-japan-economy/

With the Japanese people unwilling to spend, companies are increasingly investing overseas rather than at home. A lack of deregulation further fuels the trend. Wages are stagnant and growth has stayed low, with frequent recessions.

Abenomics boosts the debt pile

Japan's debt burden far outstrips that of other countries, largely a result of the stimulus introduced to help fix the economy. Abenomics, Prime Minister Shinzo Abe's rescue plan, has helped to weaken the yen and boost corporate profits but wages and domestic spending have remained fragile.