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In recent days, the names of Deutsche Bank and Lehman Brothers have appeared together in numerous holders salmon press across the globe , to the dismay of investors. And it’s no wonder. In the retina of the market, it is still the fateful September 14, 2008 when the US government allowed the fall of the Wall Street giant to unleash the biggest financial crisis since the Great Depression. From this experiment, the political and economic powers internalized the idea that companies and organizations were ‘too big to fail’ (too big to fail) and thus has reached our days.
However seven years and four months after living which has come to the history books as the ‘black October’ worst fears re-emerge on the floor of the hand of a ‘too big to fail’ Europe: Deutsche Bank. And it is that the market doubts its ability to meet its obligations on its debt at higher risk, and proof of this is the sharp increase in their CDS insurances against impago-, whose price has soared more than doubled this year, while stock market have plunged almost 50% since December. Right now, the bank’s shares are in the lowest level in its history, at just over 14 euros per title.
in fact, on Monday after suffering its biggest fall in seven years on the stock market, the largest bank in Germany has been forced on Tuesday to launch a reassuring message, ensuring that you have funds sufficient to cover the payment of the convertible debt issued in 2014 by 4,600 million euros to strengthen its capital (called Cocos) both this year and next.
Just before the entity to step out, coconuts were at the center of debate for its recent slump, as described in the following graph:
in this sense, his co-CEO, John Cryan, told employees that the company was” rock solid “and in a statement to investors said the bank has a “strong” capital position, reaffirming the position expressed in the presentation of the results of 2015, which said that Deutsche Bank has no need to raise capital.
Your problems legal grow
However, the results themselves presented the bank a few days ago are by no means a matter of quietness. The German company presented the worst numbers in its history, with losses amounting to 6,700 million euros. This “disappointing” Cryan accumulated balance to a strong supply of 1,200 million euros to deal with legal disputes. And the bank has been involved in several cases to manipulate the interbank interest rate.
Deutsche Doubts about the reasons for mistrust and similarities to the fatal if Lehman did not stay there, and Brothers are getting bigger.
Your legal problems accumulate. Last week, Bankinter noted in a report that has received a US demand amounting to 2,820 million euros. The claim relates to losses incurred by investors in 10 investment products containing toxic assets, mainly mortgages. . A music that sounds very similar to that rang in the US in the implosion of subprime
Bankinter, in a measured tone, says: “The bank will have to prove in court that there was no shortcomings in the management and control of the investment vehicles mentioned. the amount of the claim is significant because it represents 14% of the market capitalization of Deutsche Bank estimated for 2016 and exceeds the BNA (about 2,750 million euros ). We understand, therefore, that the legal risk remains high, despite the heavy penalties received during the last years. ” Meanwhile, Deutsche Bank reflected in his final presentation of results which has 5,500 million in reserves for litigation.
The exposure to risky assets is leading to the collapse of large banks US investment. They generated a snowball whose explosion splashed everywhere. Despite the controls that have tried to impose since then, the US portal Zero Hedge has existed for several years warning of excessive Mountain derivatives which discussed the Deutsche Bank. The following chart speaks for itself:
the concern of this brutal statistic is much of the exhibition is to raw materials, which dramatically increases the likelihood of default in the absence of a rebound of oil and other materials, something that China’s recovery will have a transcendent superiority.
So it is not surprising that several experts and speak directly to European banking collapse. Another heavyweight finance, Citi showed doubts last January 28 on Deutsche said in a report. Citi talk that its capital ratios are well below those of its competitors and in 2017 will require a capital increase of up to 7,000 million. More wood Tuesday German bank itself trying to clear negating the need for such additional own resources.
What is certain is that the entity is conducting a brutal cut internally. Last October, it announced the largest restructuring internal level ever. In the next two years, its leaders advanced a reduction of 35,000 workers (most of them by cutting off part of the bank) and the abandonment of 10 countries. On the other hand, and then he suspended the dividend 2015 and 2016.
But the experience is a degree and the real fear is the contagion effect that may occur. I not fit into anyone’s head in 2008 that as many as Lehman Brothers might fail. So, in January it marked the worst start of the year in debt issues of the last eight years, while the price of high-risk bonds -’high yield’- has sunk 78% in the past year. Therefore, not only Deutsche Bank, also its European rivals, most notably Credit Suisse or Barclays, are being shaken in a bag for investors seeking to reach safety in the difficult macro scenario.
it is that the turbulence in the financial sector, which is suffering from the deterioration of their margins and ability to generate profit in an environment of low interest rates is not the best place to stand firm against the doubts that are emerging. To all this, moreover, the experts add an element of concern. If a crisis erupts dimensions of 2008, central banks no longer have room for maneuver they had then
ElConfidencial
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