It has almost become a habit. Deutsche Bank has -indirectly – caused a mini infarct on Wall Street on Thursday, when Bloomberg News and the AFP have announced that a dozen hedge funds have withdrawn their money from the German establishment. Its share price has fallen by 6.67%, leading all other banks in its downward spiral in the stock market. Before going up to the announcement of a relief, probably of the fine payable by the establishment for its involvement in the subprime mortgage crisis.
But even as prices peaked at over € 100 in 2007, it peaked today at 12 euros. Last February, the CEO of the Deutsche Bank, John Cryan, had felt compelled to personally intervene to defend the “robustness” of its establishment, reported The World. Same player shoot again in the beginning of the week: the giant German was required to certify that he had no need of a public rescue.
The concern however persists among investors. Deutsche Bank, caught up in a financial turmoil unprecedented, risk-she filed for bankruptcy? And can it lead to the european banking system and the world to his suite, the picture of Lehman Brothers, responsible for the global crisis of 2008?
The Deutsche Bank, which cut like ten years ago
In theory, yes. Since the crisis, the financial stability Board (Financial stability board) publishes an annual list of the 30 banks with the most systemic in the world. To be clear, the institutions that are likely to cause a global collapse of the system. Among them, Deutsche Bank. However, according to the international monetary Fund (IMF), the links of the German with most world’s biggest banks are even is the main risk factor for the financial system as a whole.
It must be said that the former flagship of the German is faced with many difficulties. “Deutsche Bank has changed very little over the past ten years. It is cut to evolve in an environment of strong growth and high profitability, analysis Alexandre Baradez, chief analyst at IG France. However, the growth remains low and interest rates are desperately low”. Has the image of other european banks, Deutsche Bank, therefore, must cope with a low profitability and margins eroded, reminded The World in February. Without being able to provide anything other than a “strategic plan confused,” laments David Benamou, chief investment officer at Axiom.
Arrived at the head of the bank in 2015, John has embarked on a restructuring plan late, but the information provided to shareholders will remain limited. Not to mention that the bleeding continues. In the fourth quarter of last year, Deutsche Bank has lost € 2.1 billion. And the worst thing is that the losses have focused particularly on its core business: investment bank.
In parallel, the bank is reaping the poisoned fruits of this which has gradually become her main activity and in which the new boss is trying to get rid, as was Les Echos in February. “Deutsche Bank has phased out of the retail bank to become a huge investment bank. Sub-prime to the manipulation of the Libor rate, it has soaked in all the cases” confirms Jezebel Couppey-Soubeyran, professor at the University Paris 1.
And now sees a requirement to pay for its abuse. In the context of the subprime crisis, the u.s. department of Justice has requested $ 14 billion -12,5 billion euros – in the first German bank. The term of the agreement between the two parties, the final sum should be closer to $ 5.4 billion -4,8 billion euros. An amount already earmarked by the bank to resolve its litigation.
A bankruptcy is “highly unlikely”
Because the list of his troubles is likely to lie. “Russia is currently investigating a case of money laundering assumed in its Russian subsidiary,” says David Benamou. It could also cost him $ 2.5 billion”. The money set aside to pay the invoice could quickly be insufficient. “The bank will have to increase its ratio of regulatory capital of 10.8% to 12.8% by 2018,” continues the analysis of Axiom.
Deutsche Bank, therefore, seeks money. Mission impossible? Analysts are not so sure. “The bank has several levers, slice David Banamou. By disposing of its stake in chinese bank Hua Xia Bank, it can expect to collect between 2 and 3 billion. And with Postbank, between 6 and 7 billion. Add to this the fact that the bank is suffering from a crisis of profitability and not of solvency, and it is understandable that the hypothesis of a bankruptcy remains highly unlikely”.
“Angela Merkel is reported to have said that it will not help the Deutsche Bank, in the event of a crisis,” adds Alexandre Baradez. We approach a phase of elections. The policies are very reluctant to the idea of rescue of the banks. The risk, it is fuelling populism. But one can hardly imagine that in cases of extreme emergency, the Germany drops the Deutsche Bank!” What probably rule out a possible scenario for black Lehman Brothers.