OUCH !! NEW YORK (Reuters) - Deutsche Bank (DBKGn.DE) has set aside over 1 billion euros ($1.1 billion) to cover the cost of offloading derivatives in its ‘bad bank,’ or capital release unit, three sources at the bank told Reuters. The cost, which has not been publicly disclosed, is included within the 7.4-billion euro budget the German lender has set aside for its restructuring, which will also see 18,000 jobs axed as the bank exits unprofitable businesses. Key to the restructuring is the creation of a ‘bad bank’ to house 288 billion euros of unwanted assets earmarked for sale or wind-down, including equity derivatives and long-dated interest rate and credit derivatives. Deutsche Bank is still assessing and gauging interest in the assets before repackaging some for sale, the sources said. Deutsche Bank declined to comment. The bank will run a formal auction of its equity derivatives book, which Reuters reported last week had garnered “significant expressions of interest” from U.S. and European banks, over the next two months, the sources said. After that, it will attempt to sell portfolios of long-dated interest rate and credit derivatives. Those assets have low returns and require high levels of capital to be held against them, making them less attractive to buyers. As a result, Deutsche Bank may have to offer deep discounts to offload them, the sources said. Deutsche Bank executives believe they have made a conservative assumption of the cost of offloading the derivatives and are confident that writedowns will not exceed their expectations. However, if the cost of exiting the positions were to be higher than anticipated, the bank would likely have to hold some of the derivatives positions beyond the 2022 deadline it has set for offloading them, the sources said. The alternative would be to take deep writedowns and raise funds from shareholders to cover the extra losses, something it has ruled out doing. It is not certain investors would even back such a move, having already stumped up 29.3 billion euros in four capital raises since 2010. The bank has targeted reducing assets held in the unit to 119 billion euros this year and 9 billion euros by 2022. Consultants questioned whether the bank can achieve that target while keeping within its budget. “If they have some really smart structures in mind and are prepared to take deep discounts that may be achievable, but if they want to do it in an orderly fashion and limit the downside I’d say they’re looking at 5 years,” said Robert Cranmer, a partner at financial services consultancy Sionic. Mayra Rodriguez Valladares, managing principal at consultancy MRV Associates, said the bank will face significant administrative costs on top of writedowns from asset sales. “I think this is going to cost a lot more. I don’t see how they’re going to get away with this little expense to wind all this down,” she said. “Deutsche will have to hire external auditors to make sure everything is in order and there will be additional IT expenses.” Deutsche Bank’s Chief Executive Officer Christian Sewing is looking to restore confidence among investors who have seen the bank’s stock lose more than three-quarters of its value over the past four years. The derivatives positions, some of which don’t expire for as long as thirty years, are tying up capital that could generate hundreds of millions of euros in income each year, Reuters reported last week. Deutsche Bank announced the creation of its capital release unit in July. It is the bank’s second attempt at hiving off unwanted assets since the 2007-2009 financial crisis. The unit houses fixed-income assets, including long-dated interest rate derivatives, worth 79 billion euros, Deutsche Bank has said. It also contains 25 billion euros of assets, mostly credit and interest rate derivatives, which Deutsche Bank initially hived off for sale or write-down in 2017. Some analysts say Deutsche Bank will still be left holding problem assets even if it successfully offloads those placed in the capital restructuring unit. Only 30 percent of Deutsche Bank’s 24 billion euros of Level 3 assets, which are the most illiquid and hard to value, have been placed within the unit, according to a presentation the bank made alongside its second-quarter results last month. Deutsche Bank declined to comment on why it chose not to place more Level 3 assets in its ‘bad bank.’
I don't know much about this, but those lines quotes above made the hairs on the back of my neck dance a jig. I mean, what is quoted there is BAD, yes? Isn't that something akin to 2008?
No it isn't similar to Lehman in this case... It's mostly interest rates swaps, but they front runned profits and bonuses, and the stupid thing about swaps is that both parties show assets gaining for years when that can't be true, someone has to lose the trade in the end... Mark to market value con will come back to drill them if they are on some losing sides. They are fucked for sure it's a matter of time, their last earnings were uber sketchy, they lost of memory 12 or 14 billion in liquid reserves and didn't provide a reason why... Interest rates swaps all have credit rating clauses, Junk rating nullifies it and they would go kaboom, they got downgraded to BBB, one more cut sends to -BBB and panic starts. Lehman went to shit when they couldn't put their MBS as collateral in Repo, and got choked out of funding, then CDS got triggered. This could be similar if they keep losing money non stop, their market cap is so small compared to Liabilities I think the CDS linked to DB is what should scare people, that's the fatal blow Lehman style and global recession, but this Lehman blow up starts in Asia and triggers to Europe I believe.
Who in their right mind would even entertain the thought that of the 50 TRILLION DB has put on over the years that the only "exposure" is around 20 BILLION? Nothing to see here sheeple, move along. https://www.marketwatch.com/story/d...hallenges-in-shedding-those-assets-2019-07-26
https://www.bloomberg.com/news/arti...record-low-as-europe-s-banking-crisis-deepens Three years into Commerzbank AG Chief Executive Officer Martin Zielke’s turnaround, the party’s over. Shares of the lender fell to a record low Monday, capping a roller coaster ride that saw the stock more than double after the CEO announced his plan, buoyed by expectations for higher interest rates and consolidation in European banking. Zielke has refocused the bank on lending to corporate and individual clients in Germany, turning it into a proxy for economic growth and interest rates in the region that attracted investors such as Cerberus Capital Management. German banks seem to be collapsing! Something brewing under the surface