Germany - Is Deutsche Bank Turning Into A New Lehman?

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German Chancellor Angela Merkel has a lot on her plate at the moment. There is an interior minister, Mr Ernst Seehofer, within her own party asking for a tougher migration stance, her country overcome with a slight case of depression now that for the first time their team did not reach the knock-out stages of the World Cup (do not underestimate German pride) since 1938 and, lastly, their biggest bank, Deutsche Bank, seems caught in a continuous maelstrom of bad news.

Yes, Deutsche Bank, the European behemoth of finance has been caught off guard apparently after it emerged today that, in the same week its stock hit a new yearly low, its US subsidiary failed to pass a so-called annual ‘stress test’ in which the Federal Reserve checks whether banks have enough capital to withstand extreme volatility in the market.

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The Fed said it had found “widespread and critical deficiencies” in Deutsche’s capital.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Oops! Deutsche Bank shares drop by almost 4%, below 9€ for the first time since the 1980s as fears of a credit crisis doing the rounds. Deutsche Bank is 44% down YTD, worst performer in the Stoxx 600 Banks Index, which is down 14% since the start of the year. <a href="https://t.co/GlpwaJUYOe">pic.twitter.com/GlpwaJUYOe</a></p>&mdash; Holger Zschaepitz (@Schuldensuehner) <a href="https://twitter.com/Schuldensuehner/status/1011894418155229184?ref_src=twsrc%5Etfw">June 27, 2018</a></blockquote>

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The news comes as another blow for the German bank as it tries to regain profitability, knowing that it’s shares are already down some 41 percent for the year.

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Octavio Marenzi, CEO of consultancy Opimas, admitted that: “It does seems like Deutsche Bank at the moment is the worst student in the class that can’t get anything right.”

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Deutsche Bank credit investors getting more nervous as Federal Reserve found “widespread and critical deficiencies across the firm’s capital-planning practices” in stress test. Deutsche Bank EUR Coco yields &gt;10%. <a href="https://t.co/agiiRq3VV7">pic.twitter.com/agiiRq3VV7</a></p>&mdash; Michael Andre Evans (@MichaelAndreEv4) <a href="https://twitter.com/MichaelAndreEv4/status/1012587058165112832?ref_src=twsrc%5Etfw">June 29, 2018</a></blockquote>

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Back in 2007, just before the financial crisis of 2008-2009 erupted, the stock of Deutsche Bank traded around 88 Euro. This week it dropped to 8 Euro. Ten years after the demise of Lehman, many in the financial world ware starting to wonder: do we have a new Lehmann on our hands?

Just as Lehman Brothers back in the day, in fact, Deutsche Bank has a large derivatives exposure. Hedge fund investor Doug Kass explained in his weekly column that Deutsche Bank could well be the “next Black Swan for the EU economy.”

Source:

https://www.dw.com/de/deutsche-bank-rei%C3%9Ft-us-stresstest-h%C3%BCrde/a-44450850