Will Deutsche Bank Be Saved From Collapse?
- Will Deutsche Bank Be Saved From Collapse?
by Dave Kranzler, http://investmentresearchdynamics.com/ , 8 Feb 2016
Deutsche Bank stock is down over 8% today. It’s trading at $15.53. This is 20% lower than the previous low it hit at the apex of the great financial crisis (de facto collapse) in 2008/2009.
With rumors flying because of DB’s stock performance this year, management issued a statement defending the bank’s liquidity position: LINK “Additional Tier 1 coupons” references the debt that was issued as part of a transaction to raise Tier 1 regulatory capital by Deustche Banks. The accounting behind the scheme – yes, it’s a scheme – is complicated but the regulators permitted DB is issue a security that behaves like debt but is treated as Tier 1 capital for the purposes of measuring the bank’s ability to withstand hits to its asset base.
Suffice it to say that historically, when a bank has been forced to issue a statement defending its solvency, insolvency is not far behind. We saw this with Bear Stearns and Lehman. Denial of a catastrophic problem is affirmation that the problem is very real.
Typically the credit markets sniff out a very real problem before the equity market “catches up.” Deutsche Bank has emerged as one of the most recklessly managed “Too Big To Fail” banks. Under Anshu Jain’s “leadership,” DB became a financial nuclear weapon bloated on derivatives, exceedingly risky assets and highly corrupt upper management. It’s a literal cesspool of financial fraud and Ponzi scheme banking activity. The graph of the spread on DB 5-yr credit default swaps shows how quickly the market has determined that DB’s financial risk of insolvency is quickly accelerating: