Is It Time To Panic About Deutsche Bank?

Tyler Durden's picture

Back in April 2013, we showed for the first time something few were aware of, namely that "At $72.8 Trillion, The Bank With The Biggest Derivative Exposure In The World" was not JPMorgan as some had expected, but Germany's banking behemoth, Deutsche bank.

Some brushed it off, saying one should never look at gross derivative exposure but merely net, to which we had one simple response: net immediately becomes gross when just one counterparty in the collateral chains fails - case in point, the Lehman and AIG failures and the resulting scramble to bailout the entire world which cost trillions in taxpayer funds.

We then followed it up one year later with "The Elephant In The Room: Deutsche Bank's $75 Trillion In Derivatives Is 20 Times Greater Than German GDP."

Then, last June, we asked the most pointed question yet: "Is Deutsche Bank The Next Lehman?" only this time it wasn't just the bank's gargantuan balance sheet risk shown below that was dominant...


.... but the fact that it impaired assets had finally started to trickle down through to the income statement, leading to loss after loss, management exit after exit, market rigging settlement after market rigging settlement, and all culminating ten days ago with the bank's "titanic", and record, €7 billion loss, surpassing the bank's troubles even during the depths of the Global Financial Crisis.

But while income statement losses can be brushed aside, far more troubling was that even other banks had started paying attention to the bank's balance sheet. This is what Citi said:

We view the leverage ratio as the binding capital constraint for Deutsche. The current 3.5% is well below peers and the company’s own 4.5% target. Post restructuring & litigation charges and a Postbank divestment at 0.6x P/TB, we estimate a pro-forma leverage ratio of c3.3%. This implies a c€15bn shortfall, of which we expect part to be met by underlying retained earnings and part via AT1 issuance. However this still leaves an equity shortfall – we see a c4% leverage ratio by end-2017 – which is likely to necessitate a capital increase of up to €7bn in our view. In addition we note the target CET1 ratio of >12.5% only allows for a 0.25% management buffer above the fully-loaded SREP requirement. This provides the company with limited flexibility especially if BaFin were to introduce a counter-cyclical buffer (max 2.5% add-on).

And then there is the huge black hole that is China, and exposure to it... although others are starting to pay attention, and as New Europe wrote two weeks ago, "Major European banks... are significantly exposed to China and if there is significant deleveraging the impact will no doubt be global."

Banks such as HSBC, such as Deutsche Bank.

We bring all this up because here is what the stock price of Deutsche Bank has done since our first warning about the huge potential risks borne by Deutsche Bank, back in April 2013 - earlier today it touched on fresh post-crisis lows and down substantially since we first started warning about it:


But the real chart everyone should be paying attention to - we certainly have been for a long, long time - is that of DB's Credit Default Swaps, the earliest harbinger not of company risk, that has been there for a long, long time, but far more importantly of the market's realization and admission of this risk, have been blowing up and screaming that something is very, very broken at the bank with the largest gross notional derivative exposure in the world.


So, our question for today, is it time to panic about Deutsche Bank yet?

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EscapeKey's picture

nah, deutsche bank is backstopped by the german taxpayer. what could possibly go wrong.

Captain Chlamydia's picture

Rapefugees? Confiscate their gold to pay for the TBTF!

svayambhu108's picture

Comeon Tylers give me that real reason to panic, and go for the beer in the fridge ::bored::

101 years and counting's picture

when Cramer comes on and says DB is safe and a great value here, then is when you mortgage your house, steal your kids' college funds, take a 1 million uncollaterlaized 25% interest loan from the bank and short the fuck out of stocks.

Bumpo's picture

Just need to make a €55,000,000,000,000 Euro Coin, and all is good!

halfasleep's picture

well JP/Sachs is going to have to annex SOMEbody after this, may as well be DB. i thought it was going to be CB. rinse/repeat in 7-9 years.

HungryPorkChop's picture

This DB chart looks eerily familiar.  Maybe the German's should review this chart as a gentle reminder of what happens during these type of sitauations:


Gentlemen, man your wheelbarrows!! 

azusgm's picture

EUR/USD is up 1.79% on the day right now.

Wonder what's causing the high demand for euros?

Tarzan's picture

Trillions, derivatives, contagion, oh my...CHILL nobody PANIC!

The Black Bishop's picture

I panicked! I bought 500 ounces of silver today. I guess thats my way of panicking :-P

HungryPorkChop's picture

@Black Bishop:  You should have more panic attacks.  Hopefully on a regular basis!

Tarzan's picture

What would happen if everyone suddenly maxed out their credit on phisical, Who would PANIC then?

Squid-puppets a-go-go's picture

so, that ol' eyedropper of Ice-9 damacles hovers over the Baltic this time

AldousHuxley's picture

Fed, US Treasury, and US bankers saw threat to petrodollar system from because Euro offered an alternative for oil producing countries as they await Yuans internationalization.

So, Euro is to be discredited by the way of exposing the credit worthlessness of PIGS. Greece = Goldman's Torjan horse into ECB for timely negative PR.

Now ECB is weak and her largest owners/controllers are hurt as well which directly impacts German banks namely Deutsche Bank.


DB = largest sharesholder of ECB

Frankfurt = HQ of ECB, just 2 miles away from DB HQ

Effectively, EU = Germany's empire, ECB = DB


Now the war isn't between DB and GS as Goldman is getting shafted as well. It is really between European colonial old money VS Warren Buffett

Performance since 2007 highs:

DB: - 90% 

NMR: - 75%

GS: - 33%

JPM: + 9%

WFC: + 30%    ..... WE HAVE A WINNER!!!

KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) AldousHuxley Feb 3, 2016 9:32 PM

"What would happen if everyone suddenly maxed out their credit on phisical, Who would PANIC then?"


The catfish at the bottom of the lake.

weburke's picture

is db the next L , was asked during L 

AldousHuxley's picture

next institution to fall insn't a bank, but a central bank as they absorbed the toxic assets. 

It will be the battle of US FED vs ECB vs PBoC.

outcome will be strengthening of global currency system: XDR vs GOLD vs digital (bitcoin)


aleph0's picture

Belgium - HQ of NATO
Belgium - HQ of EU
Belgium - HQ of SWIFT

So why did they put the ECB in Frankfurt I wonder 


khnum's picture

db april $11 puts are trading at 5000x what could possibly go wrong

Pack Man's picture


One heck of a Stop Run  :-)

ISEEIT's picture

USD got dumped hard (and likely a coordinated takedown).

It's not euro demand so much as a usd across the board smackdown.

That sets everything off into frenzy mode. Every major currency pair has had magnificent volatility so far this year.

Ya think 'economics' and 'markets' are complicated?

I'll tell ya what: These sick fucks couldn't design and maintain a 'county' with a human population of 150,000.

So running the world obviously wouldn't be their 'forte'?

Don't even ask about 'stopping climate change'....Blah, blah, blah.

If these sick fucks can't 'fix' everything they've already destroyed, then can someone explain (lucidly) why billions of people tolerate this shit?

Humanity is literally being herded into a future which clearly was not ever intended to be harmonious with the fundamentally spiritual and decent nature of most humans.

It's really only that tiny percentage which has led to this.

The inmates are not only running the asylum.

They designed it.


BoNeSxxx's picture

Exactly. And well said. I had to log in to lob you a greenie.

azusgm's picture

It is a spiritual war now. Very, very few people are prepared to defend themselves or their families or their country because they cannot define the problem. They either do not believe in evil or they do not understand that a few individuals and families are willing to turn themselves over to evil to attempt to harness that power. It used to be that much of the evil was hidden. Then it was hidden in plain sight. Now a great deal is out in the open with only a thin veneer. People of good will cannot relate to the mindset of the greedy or those gluttonous for power. Without clear recognition of what is right before them, the alarm bells create only dystopia at best.

Regulations won't fix things.

New laws won't fix things.

More money won't fix things.

Lawsuits won't fix things.

Armed conflict won't fix things.

Elections won't right the world either, although we might be able to gain some breathing room and time.

If you have any intention to fight back, aim your training toward spiritual fitness and engage on that plane. Otherwise, any attempt you make will be ineffective because it will be aimed at the wrong target.



Fish Gone Bad's picture

Ted Cruz wants to win so badly he is even willing to bear false witness againt Ben Carson.  It will be interesting to see how a little ninth commandment violation is spun by the evangelicals.  When politics and religion combine it makes for really ugly children.

Keyser's picture

Come on now, let's not mince words... The Cruz team lied their asses off about Carson dropping out of the race and about Trump supporting Obamacare... It is almost as if he has the master rat-fucker, Carl Rove, on the payroll...

Lets_Eat_Ben's picture

12 For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places.

13 Wherefore take unto you the whole armour of God, that ye may be able to withstand in the evil day, and having done all, to stand.

Ephesians 6
FlowerofLife's picture

Agree, at least in general. How do you propose people go about that?

azusgm's picture

I gave you a greenie too.

Thank you for your assessment of what happened to the USD today. I didn't look any farther than the EURUSD pair.

Paracelsus's picture

Um, they had the inflation under control and currency stabilized

until the collapse of Kredit-Anstalt Bank in Austria (1932) and two

banks in Germany,NordWolle,and a bank in Dresden.Then the SHTF.

Still,it was the Versaille reparations that screwed things up for Germany.

aVileRat's picture

I was just about to post this. Bang on. DB is Prime and main conduit for most of the Germanic Cantons. If industrial demand is slumping like it is in the US/China within Germany, this would be a ticking timebob that would instantly take Germany from Have to Have-not status in about 2 years in much the same way the Credit Arg. bailout knocked 1% off the G^ in French GDP (2008-2010).


Tarzan's picture

 View Item in Catalog

  Lot #3004  (Sale Order: 338 of 874)   Sold for: $225.00 to onsite Henderson Auctions
That's 480 Qts of the full synthetic oil which sells for $5-$7 per Qt, which my new car requires, that just sold for under 50 cents a Qt, plus the premium and shipping it to your house.
There were 2 more pallets of 0W-20 and dozens of other grades, not to mention million dollar equipment going for pennies on the dollar, all in just one auction.  

It seems to me, rather then piles of dollars laying around, it's more likely cash will be banned, few will have access to it and fewer will be aloud to freely spend it. Hyperinflation may be coming, but in the 21st century it would be a world wide event, not contained to the dollar.  In the mean time the push to inflate, to feed the beast, has created some fire sales that make the lure of high priced new a hard sell.  Nobody really knows how she'll blow, just that she's going to blow, math is stubborn like that!
Squid-puppets a-go-go's picture

"In the mean time the push to inflate, to feed the beast, has created some fire sales that make the lure of high priced new a hard sell"

not quite right. QE did have a little inflationary impact, although its retention i  the fiscal stratosphere did prevent the widescale inflation many feared. What caused the DEflation in sufficient strength to ovverun the QE inflation was the nirp/zirp combined with mark to fantasy accounting. This kept producers and manufacturers alive that otherwise would be sucked under, resulting in global overproduction.

Tarzan's picture


that see-saw is what makes things so volatile, so unpredictable, the struggle between reality and fantasy.  I just don't see how the dollar could blow up in hyperinflation without taking the world with us, kinda the plan, mutual destruction.  Any threat to Fiat is dealt with War.  The next financial event is likely something we've never seen before and money as we know it will likely be gone.


ImpeachMoochelleNow's picture

7-9 YEARS???  I'm thinking more like 7-9 months...

Arnold's picture

Preparation is in the pipeline.

Don't ja just hate cleaning out your millions on deposit in 10 euro notes?

When they run out, they go to Fives.

Soul Glow's picture

Gold is getting the fuck out of dodge!  Just popped $10 in the last hour.

knukles's picture

Y'all ain't seen nuffin yet!

As per my comments yesterday ... Look out below.  The banks are the Elephants in the Room
They got the exposures.  The Primary Exposures.  Then the derivatives.  Then the derivatives on the derivatives.  And the counter-party risk on counter-party risks and NO NOTHING OFFSETS/NETS because each contract is a one off.  (Well, for all intents and purposes)
There are the beys.  The best on the bets.  The leveraged bets on the bets.  The leveraged leveraged bets on the bets that are leveraged with all sorts of untold counter-party risks inside each of the bets.

Good Luck and Good Night

BTW.  A bud of mine.  Semi-retired senior guy at a major WS firm.  He's exposed.  Big time.  To the firm and his own portfolio.  He's scared to death and perhaps near paralysis.  And this is a guy who knows what the fucks going on.  Greed, hubris, denial and so on.  The bad stuff happens slowly at first, nobody believes it.  It accelerates... it's transitory.  Pretty soon, serious damage is done.  Then it appears too late accompanied by hope... empty hope .... And after a while nights become sleepless.  People become irritable and irrational. 

Get safe  The best portfolio is the safest portfolio.  The safest portfolio is a boring portfolio.  Take the day off.  Go golfing or see a movie.  Watch the world closely.  Walk through a mall... look at how the traffic is and how many are carrying packages.  Breathe in the air.  Meditate.  Let it go.  You're safe and will be whole.  You're being taken care of. 

Tall Tom's picture

It will be an answer to my prayers to watch Deutchbank melt down.


It will take the entire World Economy down with it.


Thank you Greece. Thank you Oil.


A Greece fire may have been smoldering in that Oil.


(I know. It has been a year after all. And y'all forgot about Greece.)

new game's picture

greece fire, down below workin its' way up-luv it.; nice post and analagy, hey one off dude-thanks for the deep breathe, too.

oooouuuu that smell, whats that smell? ha...

new game's picture

even if he is a nice guy, knuks, i hope he gets his ass gored and he jumps, cause i hate greedy fuks like him...

knukles's picture

While I understand your point of view, I personally don't wish ill on anybody.  Oh, I rail at the system, the Leviathan as well if not better than most, but the whole thing just is what it is and if I begin with the blame and hate game, then my own perception of reality becomes bent.  I function best as a casual observer of the human condition.
When I rail, it rail, but it is without malice aforethought.  It is venting.  Nothing more.
I'm too old to try to control the world and walk about with negative emotions and outlooks embedded in my thought processes. 
I learned that very late in life (unfortunately not as a narcissistic, controlling, self-important young man) and now prize the clarity, calm, serenity and peace of mind it brings.

new game's picture

thought you would say or think simiular to above post, and out of respect for you as a an honest nice guy(with great sense of tastse-ha, and wit(to wit-ha) and of course the bond markets, i sincerely say im sorry, restated " i hope greedy fuks like him get ...

new game's picture

yes i still harbor some intense anger towards wall st and all the accompliances. they sussed me out of my new home real estate business at the prime of my life.

broker does mean potentially broker...

BandGap's picture

Thank you for all your comments, and most of all for the comments regarding the appreciation of the time we have here on Earth. I personally made a transformation to just let this all go about ten years ago. Nothing I could do to change it, all I could do was prepare and enjoy what the Creator had given me. In effect, I found peace - with my God and with my family. When you are young you are so focussed on the worldly things you never step back and see how small we all are in the big picture.

I sleep very well. I am nothing.

There is going to be a lot of pain, very soon.