Europe's Bank Crisis Arrives In Germany: €29 Billion Bremen Landesbank On The Verge Of Failure

Tyler Durden's picture

When most recently reporting on the latest European banking crisis, yesterday we observed a surprising development involving Deutsche Bank, namely the bank's decision to quietly liquidate some of its shipping loans. As Reuters reported, "Deutsche Bank is looking to sell at least $1 billion of shipping loans to lighten its exposure to the sector whose lenders face closer scrutiny from the European Central Bank. 

"They are looking to lighten their portfolio and this includes toxic debt. It makes commercial sense to try and sell off some of their book," one finance source said. Deutsche Bank, which has around $5 billion to $6 billion worth of total exposure to the shipping sector, declined to comment."

This confirms what had long been speculated, if not confirmed, namely that German banks have been some of the biggest lenders to the shipping sector, a sector which has since found itself in significant trouble as a result of the ongoing slowdown in global trade.

And now, it appears that some shipping loans gone very bad could be the catalyst for Europe's banking crisis to finally breach the most impenetrable border of all, that of Germany.

Because it is in Germany where we find what may be the next domino to fall as part of Europe's latest banking crisis incarnation: Bremen Landesbank.

Several weeks ago, the FT reported that the German Landesbank NordLB was considering taking full control of its smaller peer Bremer Landesbank (BLB), which is struggling under the weight of a portfolio of bad shipping loans. BLB, in which NordLB already owns 54.8%, warned last week that it would have to take a €400m writedown on its shipping portfolio, and that as a result it was facing a “mid-triple-digit million loss” this year.

As the FT added, the admission prompted concerns about the health of the Bremen-based bank, which had €29bn in assets at the end of 2015, and BLB’s owners have since been holding talks on how to bolster the stricken lender’s capital position.

In a statement made one month ago, NordLB’s chief executive, Gunter Dunkel, and Bremen’s finance minister, Karoline Linnert, said that BLB’s owners — NordLB, the city of Bremen, and the savings banks association in Northrhine Westphalia — had agreed to keep BLB’s capital “intact at an appropriate level”. "The form and size of the capital increase are currently being intensively discussed,” NordLB and the city of Bremen said. “The necessary decisions will be carried out by the end of 2016.”

The market quickly read, and internalized the news, then promptly moved on: after all, with a bigger backer set to rescue the bank, there is nothing to worry about.

Just one problem: that may no longer be the case.

In an article released moments ago by Germany's Handelsblatt titled a "Capital increase for ailing Landesbank is questionable", the German paper writes that "shipping loans have brought Bremer LB into distress and the bank can not survive without government help, but a direct capital injection from Lower Saxony now looks unlikey."

The punchline, and where the narrative veers dramatically from the smooth sailing scenario presented last month by the FT, is that according to "Lower Saxony' President Stephen Weil, a capital increase by his state and Bremen for the ailing bank is currently not realistic. "The classic method, namely when partners provide the necessary capital, does not seem to work," the Prime Minister said to the "Weser-Kurier". But, he added, "we will make every effort to save the Bremer Landesbank."

Bremer LB's sudden fall from bailout grace appears to be the latest result of political conflict, because as Handelsblatt notes, Weil was responding to remarks by his colleague Carsten Sieling (SPD), who excluded capital support for the BLB. In a scenario that Italy is all too familiar with, Sieling said that such an action would not be in line with EU requirements.

In other words, Germany may now find itself in the ironic situation that its own bailout intransigence will force it to engage in a bail in for one of its bigger banks.

To be sure, it is possible that a solution is found, and Merkel will need to concede to not only a Bremen LB bailout, but one of Italy as well, as the two would go hand in hand. On the other hand, it just may be the case that Germany refuses to save even one of its own.

And while the final outcome remains uncertain, the market quickly read between the lines and responded in preparation for a worst-case outcome: in intraday trading the bank's "equity-like" 9.5% Contingent Convertible bond of 2049 has plunged by almost half from 120 to 73 in minutes, a move which has likewise spooked broader global markets.

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Evan Wilson's picture

I gues the high rate of 9.5% was not enough to cover the risk.

 

 

marx's picture

The high rate was a false flag event.

 

 

samjam7's picture

It's all Brexit's fault, we told you so! Schäuble is not to blame...

JRobby's picture

Domino Effect

CB's balance sheets grow to $60 - $100 trillion (reported)

You decide

Bunga Bunga's picture

You have to distinguish between cause and catalyst.

knukles's picture

A Landesbank.  Kinda like a big regional semi-private S&L
Going belly on boat bonds.
Oy!

 

See the waterfall?  The Landesbank is hurting, so it's owners need chip in (including public taxpayer funded entities, cities, etc.) to keep in capitalization standards.
So who's getting the collateral call?
Who's backstopping this kinda crap?

Uh huh....

wildbad's picture

ach du lieber Gott!

 

ich glaube mein Schwein Pfeift!

Lets Buy The Dip's picture

THIS brexit stuff had zerohedges jizzing in pants, they loved it. 

this blog here, => http://bit.ly/29CY8J0 who I read is very good and accurate with his stock market calls. and he is saying do not be fooled by this rally in the US, we could be seeing a freight train about to run over investors asshole. Tooot tooot! LOL

well I do not konw about that, we shall see, but something is in the wings, and the powers that be might have something planned for the market latetr in the year. 

PleasedToMeatYou's picture

Lick my freshly soiled crack you SPAMtroll. 

The central planners's picture

If a massive dafault occurs its that DB was "careless" managing their assets.

knukles's picture

Yeah. That somebody senior was not paying due attention to inside information, let alone state secrets.....

WTFUD's picture

What's really out there, lurking in the DEEP . . . ?

Got to hand it to all of these actors, players, parasites, in that, they can still stick out their chests and feel self-important.

E.F. Mutton's picture

I get the feeling we've finally reached the top of the rollercoaster.  

 

JamesBond's picture

ALL countries in the EU are flat broke.  ALL of them.

 

 

Kirk2NCC1701's picture

'Broke' = Peak Unrealizable Debt Obligations, based on Deception, Corruption and Fraud*.

* / It's TBD is "alleged Fraud" merits criminal prosecution, or if it can be dismissed as "Gross Negligence". /s

Mister Ponzi's picture

All countries in the Western world are flat broke. ALL of them.

 

There, fixed it for you!

new game's picture

these bank failures are being protrayed as events when they are a process of bad decisions based on keynsian beliefs that the economy will be fine and ships will crowd the seas delivering goods as if xmas was a year round event...

Fish Gone Bad's picture

It has got to be Trump's fault, somehow.

/s  <--- Do I really need this?

sessinpo's picture

what country isn't broke?

Uchtdorf's picture

Right, and slightly off-topic, that's why it is sheer lunacy for the Nobel Peace Prize winner to say that in extending the US commitment of troops to Afghanistan, NATO is also doing their share by providing troops and mariel. We speak of the other countries of NATO as if they are supporting the Organization at the same level as the US. They ain't and they won't, ever.

Lore's picture

First the EU, then NATO, then the UN and IMF and BIS... 

BREAK DOWN these pathological globalist edifices! 

adanata's picture

The "other" countries in NATO are just along for the involuntary ride. They are strictly window dressing; part of the propaganda narrative; a 'cover' for the activities of DC and the Roths who are running the game.

SidSays's picture

As "they" wish it to be.

WROL...

Tick...tock..tic...

Secret Weapon's picture

Actually the corporate governments are broke. 

The people are fine .

Fuck the dorporations in the neck.

kliguy38's picture

Nahhhhh.....we gotz jist a lil further ta go .....then Weeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

scintillator9's picture

Or, more like an Express Elevator to Hell, Goin' Down.

https://www.youtube.com/watch?v=bHzov33tgfg

 

 

 

Mr. Kwikky's picture

Quick pass the bag of shit over..and find a seat when the music stops.

That arrow says it all looks like the bombs they were throwing on Dresden=Bilderberg 2016

Dragon HAwk's picture

A Bank here,  a Bank There, pretty soon you have an entire banking System..

Kirk2NCC1701's picture

Countdown to Moar QE.

There's gonna so much 'QE', that it's gonna make Queen Elizabeth (QE) have QE envy. 

She will not be amused. But she may be 'entertained', if her Royal CFP gives her the "Feel Rich Effect".

cowdiddly's picture

More like Fred Sanford grabbing his chest saying " I'm coming to join you Elizabeth"

Jacopo's picture

Wondering what other German banks might be in trouble b/o shipping loans. BLB is one of the smallest. SELL

Tursas's picture

Love it! Germany created this totally undemocratic fiasco we call EU!  DB is much more in hole than BLB.

Fire the EU oligarchy - if they don't go voluntarely bring in the guys with pitchforks and Guillotines, not likely needed!  Copy all the new EU rules from the EFTA rule book! 

Haus-Targaryen's picture

If you think Germany created the EU, you are either illterate or daft. 

Mr. Kwikky's picture

That's correct CIA asset Jean Monnet and former NAZI Walter Hallstein are a few of the founding fathers.

Haus-Targaryen's picture

What does one have to do with the other? 

donhuangenaro's picture

never heard of cause/consequence correlation? must be you are the illiterate one...

Haus-Targaryen's picture

You'll have to explain how (former?) Nazis being founding members of the EU = Germany created the EU.  

Intrinsic in this thought process is that these people created the EU on orders from Berlin ... in the 1950s.  I would imagine the orders came from elsewhere and Berlin or Bonn wasn't calling anything in the 1950s.  

 

walküre's picture

It's all France's fault. They created the bullshit because bureaucracy is what they do best.

Oh and they cheat at soccer!

Mr. Kwikky's picture

The Nürnberg trials were a farce..and a joke, so was WWII.
History taught by the Western schools are a LIE.

Conclusion: cause/consequence WWII created ZIO-state Isis Ra El the final implementation after the declaration of Balfour in 1917. Lord Rothshild@your service

BTW Nipping Rothschild wine at the Rothschild boulevard in Tel Aviv...

SimmerDown's picture

Try a wine glass. That tinfoil chalice it's affecting you.

MontgomeryScott's picture

Within 24 hours of the Brexit vote, the EU stated that they had delayed rolling out the NEW branch (the E.U. ARMY, that is) ALSO, a GERMAN official was quoted as stating that NO ONE ELSE would be able to LEAVE THE E.U.

The articles were posted HERE, on ZH, as well as OTHER alternet media sources.

 

AGELA MERKEL was/is SOLELY RESPONSIBLE for the European side of the 'influx of rapefugees'. The OTHER so-called 'leaders' simply follwed her 'edicts'.

NEIN, Deutcheland didn't 'create' the E.U. The globalist central Rothschild banking system did. MERKEL is simply Hitler's 'undocumented child' who was put in a position of power (Germany is BY FAR the richest of the nations, except for Britain).

 

HER POLITICAL MACHINE is in CHARGE of the E.U. (not in contract, but in REALITY).

'MONEY TALKS, and BULLSHIT WALKS!' Those who have the GOLD make the RULES!

REALITY really SUCKS when it hits you full-on and smacks your pre-concieved notions in the FACE.

WHEN are the GERMAN people going to clean house?

Rainman's picture

Could represent the coming of the ' second leg down ' theory ;  hat tip to KreditAnstaldt ...circa 1931

RawPawg's picture

Oh,ZH..Stop,Stop

Your Such A Tease

hcho3's picture

Just like 2007, small banks are falling first. 

No need to worry until 2017. This year will be just kick the can down the road. 

JohnGaltUk's picture

Its different this time....

First the banks and then soveriegn defaults. Historically when a countries debt gets around 100% of GDP they will default. The whole of Europe and China defaulted back in 1932. All those sheep accepting negative yeilds on government bonds because they think there is no risk haha. Italian bonds are risky pieces of crap. If you are a creditor to the Italain state it takes over a year to get paid.

Get the popcorn because this economic meltdown is going to be a doozy