OK, so we’ll admit it. Despite what we said earlier, there were a few things going on today besides Deutsche Bank.
For one thing, two people posing as police officers (ever seen The Town?) apparently robbed Kim Kardashian of $8 million in a hotel room in France. Now we don’t know where they think they are going sell this but if they manage they should perhaps considering shorting Deutsche Bank with the profits.
Anyway, Dow’s lower, banks marginally lower. Boring. Honestly. We wasted time watching it all day. The networks want you to believe this is some kind of Q4 omen. It’s not. It’s just a down day because everyone in the world is worried about Deutsche Bank.
Now that doesn’t mean we don’t think this is going to be a bad quarter (see our post earlier - there’s a Bill Murray reference if the entices you), it’s just that nothing changed from Friday to Monday. We already said that Deutsche is in trouble. Everyone knows that. But they don’t believe it -truly. Because if they did, we’d be down 700 points on the Dow.
Let us reiterate, if Jens Weidmann doesn’t bailout Deutsche Bank, this whole thing will collapse again. And he shouldn’t ask Mario Draghi’s permission. He should just bail them out. Period. If that means reverting to Deutsch Marks instead of Euros, then that’s what it means. But you CANNOT let this institution fail.
The ripple effects would be unthinkable.
Europe is already on the edge thanks to the refugee crisis. Now you want to let their largest lender collapse? You might as well just hand the chancellorship to Frauke Petry. It would be like if the US was overrun with immigrants (and it’s not, sorry Donald) and JPMorgan needed a $100 billion bailout. In an election year. It’s a disaster.
(Charts: Barlcays)
Here’s Barclays:
“Deutsche Bank is among the most weakly capitalised banks in Europe (Figure 1). The last reported fully loaded (FL) CET1 ratio was 10.8%. Pro forma for the closure of the sale of Hua Xia Bank stake expected in H2 16, the FLCET 1 ratio increases to 11.2%. On a transitional basis, the CET1 ratio is 12.2%. However, the bank is in compliance with its current capital requirements. The 2015/16 Supervisory Risk and Evaluation Process (SREP) requirement set by the ECB is 10.76%. This is calculated on a transitional basis and the bank has 144bp or €6bn of capital cushion to this level. This is an important threshold as it is the relevant point at which the MDA currently triggers and therefore can be viewed as the effective minimum level that DB will seek to remain above.”
Oh, great. So they have a €6 billion cash “cushion” and a $14 billion looming litigation penalty.
But don’t worry folks, because you know who isn’t worried? Jamie Dimon:
“There is no reason that Deutsche Bank shouldn't get over its problems. They have plenty of capital, plenty of liquidity."
Maybe he can get them for $2/share like he did Bear.
What a joke.