Deutsche Bank – Code Blue

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The analogy to Lehman Brothers strengthened overnight (09.28.2016) as Deutsche Bank CEO John Cryan sounded the all clear for the bank in an interview with Germany’s Bild magazine.

So everything must be fine, right?

For those who might be inclined to take Cryan at his word, consider that we’ve seen this exact scenario play out before. In 2008, Lehman Brothers CEO Dick Fuld incredulously bellowed that the bank was fully capitalized and that he would punish the shorts who were betting against the stock. Soon after, Lehman was no more.

But what could we expect Cryan to say?

Continue reading “Deutsche Bank – Code Blue”

Deutsche Bank Down Almost 10%

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An ugly year for Deutsche Bank seems like it could get a whole lot uglier. The stock of the systemically important bank holding over $70 trillion of derivatives is under significant pressure today. Overnight it was reported that the US Department of Justice offered to settle outstanding litigation and charges relating to the 2008 financial crisis and the mishandling of mortgage securities for $14Bn. Deutsche Bank refused to settle, and the uncertainty has put the stock back within striking distance of its all time lows from last month. The total market value of the stock is under $20Bn, making the proposed settlement fine extremely significant relative to the overall valuation of the company. This is a live situation, and we’ll see how this plays out. One thing is for sure: this will be a weekend filled with closed door meetings at a variety of financial, regulatory, and governmental institutions.

Instead of going forward with an analysis of the timing of this announcement from the DoJ at this moment, I’m going to wait to see how things unfold in the next 48-72 hours. By then we’ll hopefully have a clearer picture of what’s happening at a micro level and what the potential consequences are at the macro level.

Stay frosty, amateurs: ’tis the season of Lehman – bankrupt 8 years ago yesterday.