Aswath Damodoran has weighed in on the Deutsche Bank debacle. For those who are not familiar with him, he is a very prominent NYU Finance professor and author of over 30 books on corporate finance and valuation - and a man whom I respect greatly. As a matter of fact, I cut my teeth on his valuation books early on in my valuation pursuits. That being said, I'm in disagreement with his valuation of DB shares on his blog. On said blog, he went through a quick history of DB's situation and then put together an open sourced model where he found DB to be at least 35% undervalued. The other users of the open sourced model have come to an average price that's even higher.

I value DB (using Aswath's model, not our own) at a dramatically lower price than everyone on that list, save one. Why the difference? Well, if you remember my videos on knowledge...

Aswath's model inputs err in several ways from our perspective.

1. They take the reporting of DB at face value. After wading through the notes in the financial statements, that does seem like a good idea. They need to be forensically scrubbed!
2. The assume the issues that have received a lot of media attention are the only issues that endanger DB. Again, that doesn't seem like a value assumption. Reference the raising capital video below.
3. The coming dearth of affordable capital is also not being adequately addressed.

DB's capital situation is not as rosy as Mr. El Arian is making it seem. All you, I or Mr. El-Arian has to do is read the balance sheet. Here, I'll do it for you - as excepted from page 5 of Derivative Risk Exposure of Major Banks to Deustche Bank:

Reference the video below...

The DOJ fine is but one in a cacophony of litigious sounds to be heard...

Aswath's stuff:

1. My valuation of Deutsche Bank
2. Global Banks - Data
3. Google Shared Spreadsheet: Crowd Valuation of Deutsche Bank

Our stuff:

Knowledge subscribers of any level can email me at reggie AT veritaseum.com to get a copy of Aswath's model with a few of my assumptions and comments in it. Feel free to leave your own comments as well.

Click here for our paid research on DB risks and click here for our more comprehensive EU Bank Crisis research - European Bank Contagion Assessment, Forensic Analysis & Valuation

More free links on the topic...

Why Do So Many Financial Pundits Try To Downplay the Obviously Serious Financial Problems of Deutsche Bank?

• 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

• Deutsche Bank as Ground Zero?

• Deutsche Bank's Trading At a Quarter of Book Value and Here's Why

• Revisiting the Run on Deutsche Bank: Making the Hypothetical Frighteningly Realistic - You've Been Warned!

• What Happens to Banks When the Real Funding Rate Appears?

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 Banks

• Italian Banks:The Impact of Rising NPLs
   

   

  2m 45s

  
• The IMF has always been overly optimistic when it comes to Italy
   

   

  1m

  
• European banks' exposures to oil and gas
   

   

  2m

  
• Impact of Negative Interest Rate Policy
   

   

  15m

  
• Domiciles That Don't Look Good
   

   

  5m

  

This Bank as Ground Zero

• Putting the Ground Zero Bank into Perspective Re: Germany and the EU
   

   

  5m

  
• Ground Zero & It's Counterparties - Contagion Risk
   

   

  5m

  
• Ground Zero's Adverse Counterparty Risk Movement
   

   

  5m

  
• Systemic Risks
   

   

   

  

Susceptible Bank 1: Strong Country, Suspect Global Bank - Key Performance

• Negative Interest Rate Come to More Banks
   

   

  30m

  
• Susceptible Bank 1: Common Equity Returns
   

   

  4m

  
• 2Q2016 Basic Financial Results
   

   

  3m

  
• 2Q2016 Division-wise Performance
   

   

  5m

  
• 2Q2016 Net Interest Margin & Fee Income
   

   

  4m

  
• 2Q2016 Funds Under Management
   

   

  1m

  
• 2Q2016 Performance by Geography - Europe
   

   

  4m

  
• 2Q2016 Performance by Geography - North America
   

   

  2m 30s

  
• 2Q2016 Performance by Geography - Asia
   

   

  3m

  
• 2Q2016 Performance by Geography - Latin America & MENA
   

   

  1m

  
• 2Q2016 Gross loans and advances Personal/Consumer
   

   

  4m

  
• 2Q2016 Gross loans and advances Corporate/Commercial
   

   

  4m

  
• 2Q2016 Gross loans and advances Financial Loans
   

   

  1m 30s

  
• 2Q2016 In Summary
   

   

  45s

  

Susceptible Bank 1: Financial Modeling

• Susceptible Bank 1: Forensics,Valuation & Contagion Risk Assessment
   

   

  40m

  

Enter Italy's "Bear Stearns" 2Q2106

• The Metrics
   

   

  5m

  
• The Subprime Bank That Puts Bear Stearns to Shame
   

   

  5m

  
• Breakdown by sector of “off-statement of financial position”
   

   

  3m

  
• Parallels to Bear Stearns Before it Popped
   

   

   

  
• The Notional Value Argument Often Used By Entities Taking Large Losses
   

   

   

  
• In closing, excessive leverage brings us right back to 2008 again…
   

   

  3m

  

Enter Italy's "Lehman Brothers"

• Income Statement – 9M2015 vs 9M2014 – A short analysis
   

   

  2m

  
• Net Interest Income Analysis
   

   

  3m

  
• Customer Loan Quality
   

   

  3m

  
• Financial Assets
   

   

  3m

  
• Financial Derivatives
   

   

  3m

  
• Fair value adjustments in hedge accounting: details of income items - Banking Group
   

   

  2m

  

•