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Deutsche Bank

3,432 Views | 11 Replies | Last: 6 yr ago by AgBank
AgBank
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AG
I am considering investing in my former employer's equity. I haven't worked there in years.
While I haven't followed their fight with Obama's DOJ closely, I believe that the German government would step in if needed; implying a backstop for the company, at least on the debt side. What Americans don't know is that DB is held in high regards in Europe and while I worked there, it was more prestigious in Europe than Goldman. Germany, in my opinion, isn't going to let its crown jewel fail.

I don't doubt that the DOJ would love to push for a double standard for the foreign bank, but I doubt the German government would take that lying down.

The question seems the following:
[ol]
  • Does the DOJ come off its silly $14 bn number? If $14bn is the number, what are the terms, and how does it look on DB's $1 trillion balance sheet.
  • If it doesn't work something out with the DOJ, how much flesh does the German govnt take?
  • [/ol]
    Has anyone else followed this stock?
    Football&Finance
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    AG
    Dan Davies (@dsquareddigest) just had a solid tweet storm about DB. Saying it's no Lehman, compares it to UniCredit in 2012 and UBS in 2009. It's run by a former FIG banker, he knows he can't delay and has to get it done. The question for you is at what valuation do they raise, and is the current price a good entry? I don't know if there's any sell-side research or fundamental analysis you can rely on. Prob more art than science on this one since you have the wild card of US DOJ. Personally, I can't conceive that the US would invite open regulatory war with Germany and other EU states for ephing with their equivalent of JPM/BAC/C, by fining the hell out of a potentially distressed bank.
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    jh0400
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    AG
    I'm not a buyer, but I do have some counterparty exposure. I'm not overly concerned at this time.
    Football&Finance
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    AG
    Prime Brokerage isn't really a source of bank funding, so HFs "reducing exposure" just means they're paying down lines, changing custodian, or novating swaps to another counterparty. The only effect is on the asset side of balance sheet and in non-interest income (i.e. not deposits).

    It's when deposits start to bleed and yields spike on their CP and Bonds that you'll see real concern/panic. We're no where near that right now, but if they don't resolve the uncertainty or calm the speculation it can become self fulfilling.

    Even the simplest, "safest" form of banking (taking short-term deposits and making long-term loans) requires a significant level of trust (thanks FDIC!).
    AgBank
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    AG
    jake2011 said:

    Europeans don't like bailouts especially of banks. They are much more anti bailout than the US. If they save it, they will wipe out the equity and sub debt providers and keep depositors and senior lenders safe. I wouldn't invest in it. DB has the largest derivatives book in the world and is a major prime broker and if counter parties and hedge funds lose faith it could collapse quickly. Ticking time bomb in my estimation.
    Is there CDS risk for the market if they wipe the sub debt? If so, the sub debt will likely be fine, too much systemic risk if there is a bailout.

    What I find interesting is that Germany is typically against bank bailouts, an outright bailout by issuing equity may be pretty unpopular.
    Football&Finance
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    AG
    AFP (huge grain of salt, not typically their wheelhouse) is reporting DB is near a settlement with DOJ for $5.4B, which is, IIRC, almost exactly what DB provisioned for this settlement in the first place. The fact that the settlement could be equal to provision is why you see DB up ~14% today.
    AgBank
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    AG
    A good trade so far. I have no interest in selling in the short term.
    Chandlauch
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    Heard that Quatar Sovereign wealth gave DB a cash infusion. If true, it will only mask their problems. Can anyone confirm?
    RogerEnright
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    Chandlauch said:

    Heard that Quatar Sovereign wealth gave DB a cash infusion. If true, it will only mask their problems. Can anyone confirm?
    Interesting. After reading your post, I read the paragraph on Zero Hedge.

    Are you suggesting that the cash infusion is too small to solve their problem? Personally I don't think that a whole lot has changed in the financial sector since the 2008 crisis. So DB's problem is really most investment banks' problem now that they have a reasonable agreement with the DOJ.

    I wonder if the financial sector is going to be somewhat like the airline industry, a few winners, but the sector as a whole will lose over time. Maybe I have listened and read too much Taleb.
    Aggie1205
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    AG
    For those in the know, any more news on DB?
    AgBank
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    AG
    NPR, in its fear mongering effort, did a brief segment on how close Trump is to Deutsche Bank. They postulated that DB may have their fine reduced again.
    AgBank
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    AG
    Its better to be lucky than to be good. Up 11.5% today on French political results.


    Odd thing is that I am currently reading Boomerang by Michael Lewis and am on the German bank chapter.
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