I've dedicated three articles on a customer and counterparty run on Deutsche Bank.
- Revisiting the Run on Deutsche Bank: Making the Hypothetical Frighteningly Realistic - You've Been Warned!
- The Next "I Told You So" Concerning Deutsche Bank Will Hurt Depositors... A Lot!
Deutsche Bank AG Chief Executive Officer John Cryan rushed to shore up confidence in his beleaguered lender after concern some clients are reducing exposure to the company pushed shares to record lows.
The bank’s balance sheet is safer than at any point in the past two decades, Cryan told staff in a memo Friday. “Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust,” he said
Analysts also came to the bank’s defense. Stuart Graham at Autonomous Research LLP wrote that Deutsche Bank has enough readily available funds on hand to weather more than two months of severe stress, including trading clients pulling back. Goldman Sachs Group Inc. analysts led by Jernej Omahen said the lender can also access backstops from the European Central Bank.
“Deutsche has many problems, but liquidity is not one of them,” Graham said in a note. “There can be no doubt that Deutsche could access significant additional liquidity from the ECB, should it ever need it.”
For those who many not remember, DB is domiciled in a bail-in regime state, hence... In case of bankruptcy or risk of bankruptcy of a banking institution, the saver is at risk of losing their savings or may be subject to a reduction / conversion into shares (bail-in) of the amount of the claim that he has the financial setting on top of the amount covered by the double German guarantee scheme for deposits.
If you are going to take risks with a junk company, you might as well get compensated for it. The PIMCO high yield, short duration bond fund (HYS) has arguable a superior risk profile, and pays 93x more. That's right, it pays 9,300% more than Deutsche, for arguably less risk of absolute loss, albeit materially greater risk of price volatility. So, which would one rather, an 80% chance of losing some of your money or a 5% chance of losing nearly all of your money? Hmmm....
The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have shifted part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person with knowledge of the situation who declined to be identified talking about confidential client matters.
“The issue here is now one of confidence,” said Chris Wheeler, a financial analyst with Atlantic Equities LLP in London. “That’s what’s going on here. The thinking is ‘Deutsche Bank is fine, but there’s a slim chance it might not be, so why leave my money in there?’”
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Even High School Kids Can See That Massive Systemic Risk That Deutsche Bank Represents
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The Next "I Told You So" Concerning Deutsche Bank Will Hurt Depositors... A Lot!
Deutsche Bank and the Anatomy Of A European Bank Run: Look at the Situation BEFORE The Run Occurs
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Deutsche Bank's Trading At a Quarter of Book Value and Here's Why
Here's What A Real, Live Veritaseum 5x Short DB Smart Contract Looks Like to Our Research Subscribers
If you haven't heard, we're giving out free, fully smart contracts as a 5% rebate to anyone who purchases any of our research packages above the introductory novice $50 level. This is not your Daddy's rebate! The rebate actually gets larger as DB goes down in price. For those who may be coming late to the party, we can offer a 5x long gold (or even a long gold, short DB) smart contract rebate as well. Of course, the bulk of our research targets banks and entities other than DB, but I thought we'd make DB the subject of the rebate to drive the point home. Below is an actual contract crafted off of the price of a single share of DB for about 2 weeks.
The research and knowledge subscription module "European Bank Contagion Assessment, Forensic Analysis & Valuation" contains a full report of a very large European Deutsche Bank counterparty that faces a full 27% downside from current levels. It appears as if no one suspects a clue. It also contains much, much more (including at least 3 to 5 suspect banks). We can break this apart a la carte, if requested.
As excerpted:
The Macro Scene for Italian BanksThis Bank as Ground ZeroSusceptible Bank 1: Strong Country, Suspect Global Bank - Key Performance-
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Susceptible Bank 1: Financial ModelingEnter Italy's "Bear Stearns" 2Q2106-
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Deustche Bank and the Anatomy Of A European Bank Run: Look at the Situation BEFORE The Run Occurs Featured
Written by Reggie MiddletonFollowing up on Deutsche Bank as Ground Zero?, I'd like to focus on the deteriorating credit metrics at Germany's largest bank. To be absolutely honest, an educatied consumer is the at odds with the bank's other stakeholders in this situation. Educated consumers, particularly those seeking safe, secure bank accounts and lending faciilities should be moving out of Deutshe bank right now. DB is far from safe and secure, particularly in relation to other destiniations. Remember, bank bail-ins are EU law now. European regulatory authorities can force these failing institutions to cancel or severely dilute shareholder equity or to cancel, write-down or convert unsecured liabilities to equity. Such regulatory action is referred to as a “bail-in.” Bank depositors (checking, savings, demand accounts) are investors as well, in the form of unsecured creditors.
Most depositors still don't realize this (despite Icelandic bank depositors getting smashed). Depositors are the largest, one of the cheapest, and currently the most stable form of bank financing.
Most depositors, when they realize they actually are investors, should head to safer pastures. This will leave a gaping whole in Deustche Bank where 312 euros once stood. Let's recent how I described The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs:
... Below is a chart excerpted from our most recent work showing the asset/liability funding mismatch of a bank detailed within the report. The actual name of the bank is not at issue here. What is at issue is what situation this bank has found itself in and why it is in said situation after both Lehman and Bear Stearns collapsed from the EXACT SAME PROBLEM!
... The problem then is the same as the European problem now, leveraging up to buy assets that have dropped precipitously in value and then lying about it until you cannot lie anymore. You see, the lies work on everybody but your counterparties - who actually want to see cash!
... The modern central banking system has proven resilient enough to fortify banks against depositor runs, as was recently exemplified in the recent depositor runs on UK, Irish, Portuguese and Greek banks – most of which received relatively little fanfare. Where the risk truly lies in today’s fiat/fractional reserve banking system is the run on counterparties. Today’s global fractional reserve bank get’s more financing from institutional counterparties than any other source save its short term depositors. In cases of the perception of extreme risk, these counterparties are prone to pull funding are request overcollateralization for said funding. This is what precipitated the collapse of Bear Stearns and Lehman Brothers, the pulling of liquidity by skittish counterparties, and the excessive capital/collateralization calls by other counterparties. Keep in mind that as some counterparties and/or depositors pull liquidity, covenants are tripped that often demand additional capital/collateral/ liquidity be put up by the remaining counterparties, thus daisy-chaining into a modern day run on the bank!
The research and knowledge subscription module "European Bank Contagion Assessment, Forensic Analysis & Valuation" contains a full report of a very large European Deustche Bank counterparty that faces a full 27% downside from current levels. It appears as if no one suspects a clue. It also contains much, much more (including at least 3 to 5 suspect banks). We can break this apart a la carte, if requested.
As excerpted:
The Macro Scene for Italian BanksThis Bank as Ground ZeroSusceptible Bank 1: Strong Country, Suspect Global Bank - Key Performance-
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Susceptible Bank 1: Financial ModelingEnter Italy's "Bear Stearns" 2Q2106-
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Enter Italy's "Lehman Brothers"-
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Wells Fargo was recently fined $185 million for opening over a million fake accounts and credit cards. This got a lot of attention in the media. It is our assention that Deustche Bank's situation is far more worthy of attention.
