The Finance Foundation
Reinventing capitalism for all
President of the Finance Foundation

Deutsche Bank has become the weakest link in global banking. Germany Inc is running to support.
February 10, 2016 , Michel Gabrysiak - Financial Markets

   Deutsche bank is in a quite devastating situation. It is amazing. It prompted the management to send two memos, one to investors, the second one to employees, to tell them that the bank had enough funds to pay the coupons on its risky debt. 

  The German minister Wolfgang Schauble thought indispensable to make a strong statement saying that Deutsche was as solid as a rock.

In a detailed analysis, Bloomberg explains why this situation occurred and what the risks are in front of Deutsche Bank. Its new chief executive officer, John Cryan, has apparently failed to generate confidence in his plan. The bank is assaulted by regulatory probes, volatile markets- like everybody else- and costs built up over the years.

Now, Deutsche has enormous amounts of money, yes; enormous amount of debt, yes; but its shares lost 39% of their value in one year. John Cryan has announced that there will be no dividend for 2015 and no dividend for 2016. Deutsche, like many more leading global banks, is trading below tangible book value. Deutsche is in the worst position, as it is the only one whose share price is less than half its theoretical liquidation value. Only JP Morgan, UBS and Goldman Sachs are above the storm

Of course, nobody wants Deutsche to go the wrong way. It seems that its payment capacity for 2016 and 2017 is big enough. But despite that, the selloff has not stopped. The cost to protect against risky debt continues to climb. 

This story shows that the big banks went the wrong way when trying to embrace everything and everybody around the globe. It is imperative that banks reduce their activities to a few, and stop trying to be everything to everybody. That voracity and that debt are two extremely dangerous phenomena for them and for us. 



Write to The Finance Foundation at
Stop borrowing invest your money
October 25, 2018 , Michel Gabrysiak
August 17, 2015 , Michel Gabrysiak