This page has been archived and commenting is disabled.

The First Crack: Deutsche Bank Preannounces Massive Loss, May Cut Dividend

Tyler Durden's picture




 

Amid numerous rumors that Deutsche Bank is among the corporations exposed to the VW fiasco, and to be clear there is no news to confirm that, DB has just kitchen-sinked it in a pre-announcement:

  • *DEUTSCHE BANK SEES 3Q NET LOSS EUR 6.2 BLN
  • *DEUTSCHE BANK TO RECOMMEND DIVIDEND CUT OR POSSIBLE ELIMINATION

Deutsche Bank stock is crashing down around 6% after-hours on the news.

 

 

*  *  *

Full Press release: Deutsche Bank expects to incur charges that will materially impact third quarter 2015 results:

An impairment of all goodwill and certain intangibles in Corporate Banking & Securities (CB&S) and Private & Business Clients (PBC) of approximately EUR 5.8 billion. This is largely driven by the impact of expected higher regulatory capital requirements on the measurement of the value of these segments as well as current expectations regarding the disposal of Postbank.

 

An impairment of the carrying value of Deutsche Bank's 19.99% stake in Hua Xia Bank Co. Ltd. of approximately EUR 0.6 billion. This reflects an updated valuation triggered by a change of the intent of the holding as Deutsche Bank no longer considers this stake to be strategic.

 

Litigation provisions of approximately EUR 1.2 billion, the majority of which are not expected to be tax deductible. Final litigation provisions in the quarter may be affected by further events before we finalize and report third quarter results.

 

The impairment of goodwill and intangibles and of the Hua Xia investment will have no significant impact on Deutsche Bank's regulatory capital ratios. Deutsche Bank currently expects to report a fully-loaded CRR/CRD4 Common Equity Tier 1 ratio for the third quarter of approximately 11%, which includes the impact of European Banking Authority Regulatory Technical Standards (\"Prudential Valuation\") that were adopted in the quarter.

 

Based on these charges, Deutsche Bank expects to report a third quarter income before income taxes (IBIT) loss of approximately EUR 6.0 billion and a net loss of EUR 6.2 billion. Year-to-date results through the third quarter are expected to be an IBIT loss of approximately EUR 3.3 billion and a net loss of EUR 4.8 billion.

 

Excluding the impact of the impairment of goodwill and intangibles, the third quarter IBIT loss would be approximately EUR 0.2 billion and the net loss would be approximately EUR 0.4 billion, largely reflecting the litigation provisions and Hua Xia impairment. On the same basis, Deutsche Bank expects to remain profitable year-to-date through the third quarter with IBIT of approximately EUR 2.5 billion and net income of approximately EUR 0.9 billion.

 

As part of the planning for the implementation of Strategy 2020, the Management Board will recommend a reduction or possible elimination of the Deutsche Bank common share dividend for the fiscal year of 2015.

 

All the aforementioned amounts are estimates. The final amounts will be determined in the coming weeks and will be disclosed in our announcement of  third quarter results, together with details of the implementation of  Strategy 2020, which is now scheduled to occur on October 29.

*  *  *

Is this the first crack (or the kitchen-sink'd last one?) As we asked previously, Is Deutsche Bank the next Lehman?

Submitted by NotQuant.com

Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened.  In hindsight there were a few early-warning signs,  but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.

MI-CB391_PECK_G_20140218184730

First, for purposes of drawing a parallel, let’s re-cap the events of 2007-2008:

There were few early indicators of Lehman’s plight.   Insiders however, were well aware:   In late 2007, Goldman Sachs placed a massive proprietary bet against Lehman which would be known internally as the “Big Short”.  (It’s a bet that would later profit from during the crisis).

In the summer 2007 subprime loans were beginning to perform poorly in the marketplace.  By August of 2007, the commercial paper market saw liquidity evaporating quickly and funding for all types of asset-backed security was drying up.

But still — even in late 2007,  there was little public indication that Lehman was circling the drain.

Probably the first public indication that things were heading downhill for Lehman wasn’t until June 9th, 2008,  when Fitch Ratings cut Lehman’s rating to AA-minus, outlook negative.   (ironically, 7 years to the day before S&P would cut DB)

The “negative outlook” indicates that another further downgrade is likely.   In this particular case, it was the understatement of all time.

A mere 3 months later, in the course of just one week,  Lehman would announce a major loss and file for bankruptcy.

article-2203390-1504DEE9000005DC-669_634x346

And the rest is history.

Could this happen to Deutsche Bank?

First, we must state the obvious:  If Deutsche Bank is the next Lehman, we will not know until events are moving at an uncontrollable and accelerating speed.   The nature of all fractional-reserve banks — who are by definition bankrupt at all times – is to project an aura of stability until that illusion has already begun to implode.

By the time we are aware of a crisis – if one is in the offing — it will already be a roaring blaze by the time it is known publicly.   It is by now well-established that truth is the first casualty of all banking crises.  There will be little in the way of early warnings.   To that end, we begin connecting the dots:

Here’s a re-cap of what’s happened at Deutsche Bank over the past 15 months:

  • In April of 2014,  Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure.  Why?
  • 1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of 8 billion euros worth of stock at up to a 30% discount.   Why again?  It was a move which raised eyebrows across the financial media.  The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity.  Something was decidedly rotten behind the curtain.
  • Fast forwarding to March of this year:   Deutsche Bank fails the banking industry’s “stress tests” and is given a stern warning to shore up it’s capital structure.
  • In April,  Deutsche Bank confirms it’s agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR.   The bank is saddled with a massive $2.1 billion payment to the DOJ.  (Still, a small fraction of their winnings from the crime). 
  • In May,  one of Deutsche Bank’s CEOs, Anshu Jain is given an enormous amount of new authority by the board of directors.  We guess that this is a “crisis move”.  In times of crisis the power of the executive is often increased.
  • June 5:  Greece misses it’s payment to the IMF.   The risk of default across all of it’s debt is now considered acute.   This has massive implications for Deutsche Bank.
  • June 6/7:  (A Saturday/Sunday, and immediately following Greece’s missed payment to the IMF) Deutsche Bank’s two CEO’s announce their surprise departure from the company.  (Just one month after Jain is given his new expanded powers).   Anshu Jain will step down first at the end of June.  Jürgen Fitschen will step down next May.
  • June 9: S&P lowers the rating of Deutsche Bank to BBB+  Just three notches above “junk”.  (Incidentally,  BBB+ is even lower than Lehman’s downgrade – which preceded it’s collapse by just 3 months)

And that’s where we are now.  How bad is it?  We don’t know because we won’t be permitted to know.  But these are not the moves of a healthy company.

deutsche_ceos2

Jürgen Fitschen will step down May 2016. Jain will step down at the end of this month.

 

How exposed is Deutsche Bank?

The trouble for Deutsche Bank is that it’s conventional retail banking operations are not a significant profit center.  To maintain margins, Deutsche Bank has been forced into riskier asset classes than it’s peers.

Deutsche Bank is sitting on more than $75 Trillion in derivatives bets — an amount that is twenty times greater than German GDP.    Their derivatives exposure dwarfs even JP Morgan’s exposure – by a staggering $5 trillion.

With that kind of exposure, relatively small moves can precipitate catastrophic losses.   Again, we must note that Greece just missed it’s payment to the IMF – and further defaults are most certainly not beyond the realm of possibility.

 

Not good.

Not good.

And if the dominos were not adequately stacked already, there is one final domino which perfects the setup.

Meet Tom Humphrey.  He heads up Deutsche Bank’s Investment Banking operations on Wall Street.

He was also head of fixed income at Lehman.

Prior history.

Prior history.

History never repeats.   But it does rhyme.    In market terms, it tends to rhyme just about every 7 years.

* * *

For more read the Zero Hedge piece from April 2014: The Elephant In The Room: Deutsche Bank's $75 Trillion In Derivatives Is 20 Times Greater Than German GDP

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 10/07/2015 - 17:31 | 6641816 MCsBusiness
MCsBusiness's picture

The vol for put options for Alcoa is huge, should I buy it?

 

http://www.nasdaq.com/symbol/aa/option-chain


Wed, 10/07/2015 - 17:37 | 6641866 Bernoulli
Bernoulli's picture

Whatever you do. Don't sell to open.

Wed, 10/07/2015 - 17:30 | 6641820 foxenburg
foxenburg's picture

If it wasn't for the money they endlessly scammed they wouldn't have shown a profit for years. They weren't very good at honest banking. If there is such a thing.

Wed, 10/07/2015 - 20:20 | 6642400 stormsailor
stormsailor's picture

honest banker,  military intelligence,  jumbo shrimp,  peoples politician,  

Wed, 10/07/2015 - 17:32 | 6641835 JerrySpringer B...
JerrySpringer B All Over This Shiznit's picture

Volkswagon and Deutsche Bank holding hands...Springer Drama

Wed, 10/07/2015 - 18:26 | 6641933 Arnold
Arnold's picture

Thanks.

Wed, 10/07/2015 - 17:56 | 6641965 NubianSundance
NubianSundance's picture

Must be nice to be in a business sector where no matter what you do you will be bailed out by someone else, by the entire western world if necessary.

Wed, 10/07/2015 - 18:02 | 6641999 JLM
JLM's picture

This is what happens when the executives all snort coke.  They think they are invincible and take on - lets see - 75 trillion in derivitive bets??  What assholes in their right minds take on that much toxic debt/exposure.  They need to be "detoxified" and then thrown out.

Wed, 10/07/2015 - 18:22 | 6642050 DeficitAlchemist
DeficitAlchemist's picture

HVF Theory called it -in our ' Charts talk to me - Deutsche Bank' to go bust on the 28th Sept 15...

https://www.youtube.com/watch?v=TkWIt54Nmiw

Wed, 10/07/2015 - 18:25 | 6642053 DeficitAlchemist
DeficitAlchemist's picture

ditto

Wed, 10/07/2015 - 18:32 | 6642079 honestann
honestann's picture

I assume these predators-DBA-banksters will be bailed out by the predators-DBA-Germany.  Right?  Per usual criminal practice for banksters and politicians.

Wed, 10/07/2015 - 18:39 | 6642116 BustainMovealota
BustainMovealota's picture

Sure, and all while looting the middle class citizens and  tax payers.

Wed, 10/07/2015 - 18:37 | 6642100 Dig Deeper1
Dig Deeper1's picture

Wait a minute!  I thought that they passed their stress tests so everything should be fine, right!?

Wed, 10/07/2015 - 18:39 | 6642115 StupidEarthlings
StupidEarthlings's picture

'Since glencore. .since lehman..since 2011...signs of cracking. ..recession. .depression '

 

And still up 122 today.

I feel like the new 'reality' doesn't much give a poop about any of these headlines.

:/

Wed, 10/07/2015 - 18:46 | 6642127 falak pema
falak pema's picture

You know how the CB print machine Oligarchs think ?

Deutsche Bank? A drop in the ocean of fiat; like Glencore.

This system survives all its sons who die for its imperishable soul.

Cronos ate his own sons so can WE !

Wed, 10/07/2015 - 18:48 | 6642135 bugs_
bugs_'s picture

Glencorzined

Wed, 10/07/2015 - 19:25 | 6642256 Herdee
Herdee's picture

That's just a light scratch.Wait till other stuff goes down.Their holdings of trillions in derivatives positions hedging a lot of this crap says it all.Mark Carney says it'll be better when the derivatives are all traded out in the open.I always wondered what he meant by that?

Wed, 10/07/2015 - 19:27 | 6642261 Burticus
Burticus's picture

Hey, you just said in the previous article that Glencore was the next Lehman?!  Make up your mind.

Wed, 10/07/2015 - 19:35 | 6642288 azusgm
azusgm's picture

Are we contemplating a double Lehman?

Long popcorn and banker boxes.

Wed, 10/07/2015 - 19:44 | 6642317 sevensixtwo
sevensixtwo's picture

One thing I think is missing in the endless comparissons to Lehman is the possibility that Lehman not only collapsed, but was killed for not fuly committing to the unified front of the American banking cartel.

Wed, 10/07/2015 - 19:45 | 6642321 CHoward
CHoward's picture

It's not going to take too much to tip this entire flaming iceberg upside down.

Wed, 10/07/2015 - 19:47 | 6642329 Kreditanstalt
Kreditanstalt's picture

YES!   YES!!  

DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!   DIVIDEND CUTS!  DIVIDEND CUTS!  DIVIDEND CUTS!

 

MOAR!  MOAR!  BRING 'EM ON!!!!

Wed, 10/07/2015 - 20:05 | 6642363 TeethVillage88s
TeethVillage88s's picture

Deutsche Bank AG,Deutsche Bank AG*,,,,,,,,
Ticker,DBK GR Equity,,,,,,,,
Includes Loans to:,"Deutsche Bank Securities Inc., Deutsche Bank Securities Inc., Deutsche Bank Securities Inc., Deutsche Bank AG/New York NY, Deutsche Bank AG/New York NY and Deutsche Bank Trust Co. Americas",,,,,,,,
Identified in Fed Documents as:,"Deutsche Bank Securities Inc., Deutsche Bank Securities Inc., Deutsche Bank Securities Inc., DEUTSCHE BK AG NY BR, DEUTSCHE BK AG NY BR and DEUTSCHE BK TC AMERICAS",,,,,,,,
Capital Raised From Home Governments,$0.00 ,,,,,,,,
Programs,"PDCF, TSLF, ST OMO, TAF, DW, DW",,,,,,,,
Country,Germany,,,,,,,,
Industry,Banking,,,,,,,,
"Average Daily Balance
From 8/1/2007 to 4/30/2010","$12,486.68 ",,,,,,,,
Peak Amount of Debt,"$66,011.00 ",,,,,,,,
Peak Date,11/6/2008,,,,,,,,
Number of Days In Debt to the Fed,439,Market Cap,Percent of Market Cap,TAF,ST OMO,TSLF,PDCF,DW,DW

- TAF - Temporary Auction Facility
- ST OMO - Single Tranch Open Market Operations
- TSLF - Term Securities Lending Facility, a weekly loan facility that promoted liquidity in Treasury and other collateral markets
- PDCF - Primary Dealer Credit Facility, created in March 2008 as an overnight loan facility that provided funding to primary dealers

Wed, 10/07/2015 - 20:32 | 6642442 Nesbiteme
Nesbiteme's picture

Mr. Biggelsworth?

Wed, 10/07/2015 - 20:05 | 6642367 ZeroPoint
ZeroPoint's picture

Got physical yet? You are almost out of time....

Wed, 10/07/2015 - 20:34 | 6642446 jomama
jomama's picture

Been hearing that for how many years now?

Wed, 10/07/2015 - 20:30 | 6642432 Nesbiteme
Nesbiteme's picture

Since when Dr. Rolf-E. Breuer departed the Deutsche Bank, and Josef Ackermann had taken the reins the bank has transitioned from a bank to an financial unicorn. Many on the Executive Committee have learned that today. Today, however, is too late.

Wed, 10/07/2015 - 20:50 | 6642492 Victory_Garden
Thu, 10/08/2015 - 00:32 | 6642524 SSRI Junkie
SSRI Junkie's picture

"The First Crack" sounds like a slap against the first lady, if she really is a she

 

welcome to krakatoa

http://images.craigslist.org/00B0B_djIGjdRH92D_600x450.jpg

Wed, 10/07/2015 - 21:10 | 6642550 buzzsaw99
buzzsaw99's picture

this too is bullish

Wed, 10/07/2015 - 21:27 | 6642585 JailBanksters
JailBanksters's picture

6 Billion !!!

That's chump change, they would have paid more than that in Criminal Fines to stay out of Jail.

But, they have been on suicide watch now for so many years and every year everybody reckons they're going to file for Bankrupty this year, well every year since 2003 ?-?. So maybe things are looking up. It's good to see a Rothschild Bank take one for the team, and born out of Nazism.

Anyone for a nice game of dominoes ?

 

Wed, 10/07/2015 - 22:04 | 6642680 hedgiex
hedgiex's picture

Haven't enough warnings been given on this trash (DB) and in particular those kegs of dynamites (derivatives) in its basement ? Even if you stay on this bet of the usual rescue from Central Banks, there are still better options. Do you catch the sharpest falling knife ? 

Wed, 10/07/2015 - 22:16 | 6642705 The Old Man
The Old Man's picture

What? 10% and it's a failure? I guess I wait until the wee hours. It'll be up 8% on BTFD!

Wed, 10/07/2015 - 22:32 | 6642766 GRDguy
GRDguy's picture

Looks like some promises are not going to be kept.

Wed, 10/07/2015 - 22:39 | 6642784 csm13
csm13's picture

SINCE DEUTSCHE BANK !

Wed, 10/07/2015 - 22:48 | 6642818 BlackHorsewithScales
BlackHorsewithScales's picture

Douche-Bank: systemically important....getting queazy...

Wed, 10/07/2015 - 23:19 | 6642885 Schroedingers Cat
Schroedingers Cat's picture

Wed, 10/07/2015 - 23:32 | 6642919 Omega_Man
Omega_Man's picture

hey cat face

Wed, 10/07/2015 - 23:30 | 6642911 Omega_Man
Omega_Man's picture

US will keep Germany in line at any cost... VW DB.... hard to break up...

Wed, 10/07/2015 - 23:32 | 6642917 Omega_Man
Omega_Man's picture

Germany will be recapitalized by AIIB in the end

Wed, 10/07/2015 - 23:39 | 6642935 Eahudimac
Eahudimac's picture

They'll be bailed out. Another "too big to fail". Fuck em.  

Wed, 10/07/2015 - 23:43 | 6642943 joego1
joego1's picture

Looks like we are going to get a douching soon. Black owls are a swarming.

http://yourshot.nationalgeographic.com/photos/2546979/

Wed, 10/07/2015 - 23:50 | 6642959 fatlibertarian
fatlibertarian's picture

How does the process of bailing out a bank like Deutsche work?

With so much in derevitaves, is it even possible to bail them out?

Wed, 10/07/2015 - 23:56 | 6642968 Omega_Man
Omega_Man's picture

it's easy.. the German people sign on for the risk... just like the US banks did in Congress, then they are fully committed to war.

Thu, 10/08/2015 - 00:13 | 6642992 luckylogger
luckylogger's picture

All german banks are fuked and have been since 2008.................

But their govt will not let them fail........................

So really id just don't matter.

Yes they should fail, but they will not............

Be very careful shorting these guys as the have the support of the govt....

Much more so than even the us banks..............

My investment theory is to leave them alone....................

Thu, 10/08/2015 - 01:25 | 6643075 Trips Trading
Trips Trading's picture

Hi all,

According to my own developed cyclical model (the TripsTrading Cycle Model, TTCM), Bradley Dates (purple B) and the crash cycle, the S&P500 is likely to change trend OCT 8-10, OCT 13, OCT 16-19, OCT 26 and OCT 29-NOV 1.

Click here for the updated version of the TTCM.

http://tripstrading.com/2015/10/08/sp500-tripstrading-cycle-model-3/

Enjoy the day! 

Edwin. 

Thu, 10/08/2015 - 01:49 | 6643095 Sandmann
Sandmann's picture

What is the German equivalent of Home Depot ? 

 

OBI, TOOM, PRAKTIKER

Thu, 10/08/2015 - 02:14 | 6643108 SmittyinLA
SmittyinLA's picture

Mofos tried to fuck Putin and Russians, how would Greece be doing without sanctions? Treading water, like everybody else.

Instead DB got bent over by Putin, they deserve it and more.

Thu, 10/08/2015 - 02:48 | 6643146 Praeda2
Praeda2's picture

Whoop, there it is. Why they wrote that garbage last week about refugees being good for German GDP. Bring on the massive job cuts. Hans and Frans have gotten fat on too much sausage and strudel and beer. Plus Mohameed can do their monkey job for like six Deutschmarks and hour. Their own paper said so.

Thu, 10/08/2015 - 03:16 | 6643173 Panic Mode
Panic Mode's picture

Good luck finding a job before Xmas.

Thu, 10/08/2015 - 03:30 | 6643184 bentaxle
bentaxle's picture

Doesn't it mean DBAG cannot now avoid doing the same things that got itself in the crapper in the first place? The QE may not run out, but their time will.

Thu, 10/08/2015 - 04:23 | 6643209 wizteknet
wizteknet's picture

So friggen funny quote from Reuters

INSIGHT-VW's US recall could be thwarted by reluctant diesel owners

* Few levers in place to force consumers to comply

* Angry VW owners worry a refit will reduce performance

* EPA can order a recall but has limited enforcement authority

My added, don't friggen mess my turbo diesel tdi performance, point & simple! My county is actually sueing vw for environmental damage, can u believe these money grabbers, excuses? What I worry most about is vw vehicles passing fuel emissions without a revised low performance chip/rom or eprom. Hope it requires a chip u put in to pass, old chip back zoom... Guess I'm going turbo mazda, can not afford alternatives.

Thu, 10/08/2015 - 07:21 | 6643382 EemieMeanieMinieMoe
EemieMeanieMinieMoe's picture

CUBS WIN!!!!! CUBS WIN!!!!!

Do NOT follow this link or you will be banned from the site!