• 1 day Welcome To The Used Car Bonanza
  • 3 days The Year Of The Retail Investor Keeps Getting Bigger
  • 3 days Airlines Could Recover, But Crew Remain Elusive
  • 3 days Meet The Man Behind The World's Most Exciting Oil Play
  • 5 days Crypto-Mining Immigration Could Be The Start Of A New Trend
  • 6 days Hawkish Fed Sends Gold Prices Crashing
  • 8 days Bezos Is Heading To Space This Sunday
  • 11 days El Salvador’s Surprise Bitcoin Move
  • 14 days Markets Unfazed As Inflation Hits 13-Year High
  • 14 days How the Token Economy is Disrupting Financial Markets
  • 17 days FBI Investigating 100 Types Of Ransomware Attacks
  • 18 days Fed Ends Corporate Credit Emergency Lending Program
  • 21 days AMC Becomes the Latest Winning Meme Stock After GameStop
  • 22 days The Real Reason Your 401k Has Been Lagging
  • 23 days China Lifts Cap On Births, Allows Three Children Per Couple
  • 24 days The Market Is Ripe For Another GameStop Saga
  • 28 days Senate Grills Big Banks Over Pandemic Opportunism
  • 29 days Cannabis Has A Major Cash Problem
  • 30 days Ransomware Netted Criminals $350M In 2020 Alone
  • 31 days Russia Is Taking On Google
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Nathan McDonald

Nathan McDonald

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early…

Contact Author

  1. Home
  2. Markets
  3. Other

Is Deutsche Bank the Next Lehman?

Deutsche Bank

Originally posted at Sprott Money February 10, 2016

Has the crash begun? The similarities between the current market environment and those seen in the 2008 economic crisis are scary to say the least. Investors are panicking and for good reason - signs that another Lehman-style crisis may be on the horizon.

Deutsche Bank is the one in question. This German banking powerhouse has had its liquidity called into question and is now on the fence, being attacked from all sides as article after article is released pointing to the dangers the bank now finds itself in.

As we reported yesterday, this uncertainty had a dramatic effect on the stock price of the bank, causing it to crash by 10%, dragging it down to levels not seen since the last economic crisis.

The immediate risk that has so many investors on edge is the fact that Deutsche Bank has €350 million in maturing Tier 1 coupons due in April, and even more in the future. The question of whether they will be able to repay this is what has investors so worried.

The attacks have been so fierce and so successful that Deutsche Bank has been forced to issue a press release defending their positions and the fact that they do have the liquidity to meet debt demands in 2016 and going forward in 2017:

Frankfurt am Main, 8 February 2016 - Today Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) published updated information related to its 2016 and 2017 payment capacity for Additional Tier 1 (AT1) coupons based on preliminary and unaudited figures.

The 2016 payment capacity is estimated to be approximately EUR 1 billion, sufficient to pay AT1 coupons of approximately EUR 0.35 billion on 30 April 2016.

The estimated pro-forma 2017 payment capacity is approximately EUR 4.3 billion before impact from 2016 operating results. This is driven in part by an expected positive impact of approximately EUR 1.6 billion from the completion of the sale of 19.99% stake in Hua Xia Bank and further HGB 340e/g reserves of approximately EUR 1.9 billion available to offset future losses.

The final AT1 payment capacity will depend on 2016 operating results under German GAAP (HGB) and movements in other reserves.

The most worrisome aspect of this press release is the fact that the 2017 projections do not take into account the recent significant losses that the bank experienced in 2016. This means that they are in a much worse position than they were, but whether or not it will affect them in a major way going forward is yet to be seen.

This is just another similarity to the 2008 economic crisis, as that was the last time a major developed market bank was forced to defend itself in such a manner.

Going forward, we can expect the German government to step in and attempt to stave off further collapse of the Deutsche Banks stock price and stem the outflow of liquidity. Banning short selling and jaw boning aplenty are just some of the first steps that we will see.

As in the past, Central Banksters, politicians, and the media will continue to report that all is well, nothing to see here, move along. Yet, there may be no looking back now. This can of worms has been opened and there may be no putting the lid back on - the contagion will spread.

 

Back to homepage

Leave a comment

Leave a comment