Charting The Epic Collapse Of The World's Most Systemically Dangerous Bank

Tyler Durden's picture

It’s been almost 10 years in the making, but the fate of one of Europe’s most important financial institutions appears to be sealed.

After a hard-hitting sequence of scandals, poor decisions, and unfortunate events,Visual Capitalist's Jeff Desjardins notes that Frankfurt-based Deutsche Bank shares are now down -48% on the year to $12.60, which is a record-setting low.

Even more stunning is the long-term view of the German institution’s downward spiral.

With a modest $15.8 billion in market capitalization, shares of the 147-year-old company now trade for a paltry 8% of its peak price in May 2007.


Courtesy of: Visual Capitalist



If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.

In recent times, Deutsche Bank’s investment banking division has been among the largest in the world, comparable in size to Goldman Sachs, JP Morgan, Bank of America, and Citigroup. However, unlike those other names, Deutsche Bank has been walking wounded since the Financial Crisis, and the German bank has never been able to fully recover.

It’s ironic, because in 2009, the company’s CEO Josef Ackermann boldly proclaimed that Deutsche Bank had plenty of capital, and that it was weathering the crisis better than its competitors.

It turned out, however, that the bank was actually hiding $12 billion in losses to avoid a government bailout. Meanwhile, much of the money the bank did make during this turbulent time in the markets stemmed from the manipulation of Libor rates. Those “wins” were short-lived, since the eventual fine to end the Libor probe would be a record-setting $2.5 billion.

The bank finally had to admit that it actually needed more capital.

In 2013, it raised €3 billion with a rights issue, claiming that no additional funds would be needed. Then in 2014 the bank head-scratchingly proceeded to raise €1.5 billion, and after that, another €8 billion.


In recent years, Deutsche Bank has desperately been trying to reinvent itself.

Having gone through multiple CEOs since the Financial Crisis, the latest attempt at reinvention involves a massive overhaul of operations and staff announced by co-CEO John Cryan in October 2015. The bank is now in the process of cutting 9,000 employees and ceasing operations in 10 countries. This is where our timeline of Deutsche Bank’s most recent woes begins – and the last six months, in particular, have been fast and furious.

Deutsche Bank started the year by announcing a record-setting loss in 2015 of €6.8 billion.

Cryan went on an immediate PR binge, proclaiming that the bank was “rock solid”. German Finance Minister Wolfgang Schäuble even went out of his way to say he had “no concerns” about Deutsche Bank.

Translation: things are in full-on crisis mode.

In the following weeks, here’s what happened:

  • May 16, 2016: Berenberg Bank warns that DB’s woes may be “insurmountable”, noting that DB is more than 40x levered.
  • June 2, 2016: Two ex-DB employees are charged in ongoing U.S. Libor probe for rigging interest rates. Meanwhile, the UK’s Financial Conduct Authority says there are at least 29 DB employees involved in the scandal.
  • June 23, 2016: Brexit decision hits DB hard. The bank is the largest European bank in London and receives 19% of its revenues from the UK.
  • June 29, 2016: IMF issues statement that “DB appears to be the most important net contributor to systematic risks”.
  • June 30, 2016: Federal Reserve announces that DB fails Fed stress test in US, due to “poor risk management and financial planning”.

Doesn’t sound “rock solid”, does it?

Now the real question: what happens to Deutsche Bank’s derivative book, which has a notional value of €52 trillion, if the bank is insolvent?

Source: Visual Capitalist

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chubbyjjfong's picture

As I write this comment, the views stand at "666". Mmmm, omens are coming in thick and fast for DB.

cdevidal's picture

Mirroring an earlier headline, We Can't Think Of A Time When Douche Bank Was More Disjointed From Everything

DB goes teats-up, it's time to rack 'em and stack 'em. That'll be Lehman Brothers all over again.

JamesBond's picture

It is also important to watch the German economy when DB does the last tango.  They are as fucked as DB.

cdevidal's picture

Mmhmm and when Germany goes how many wheelbarrows of Euros will Europeans need to buy a loaf of artisan mischbrot?

o r c k's picture

Or a simple suicide vest.

Tarzan's picture



So being that the real question is


"... what happens to Deutsche Bank’s derivative book, which has a notional value of €52 trillion, if the bank is insolvent?"


What are the mechanics of unwinding $trillions in derivatives?  Is there no real plan?  Is it all truly just baffling bullshit made up as they go?


You would think at least an attempt would be made to answer the real question of this issue.


How about one of you finance whizz's attempt an answer,

because my simple mind can't rap around too big to fail, failing,

without burning down the entire financial system in a flash crash as the system locks up.


max2205's picture

A broke counter party won't pay off anybodys winning all goes poof.  

MANvsMACHINE's picture

As a financial whiz, here are the steps to unwind:

(1) acknowledge that there's an issue to begin with
(2) design a plan and make sure that all potential eventualities are considered
(3) begin to execute the plan
(4) during the plan's execution, make sure you scream the words "fuck" and "holy shit" very loudly and quite often
(5) borrow a friend's nail gun
(6) tell loved ones that you love them in spite of them being uncaring and self centered
(7) fire nail gun into the back of your skull as many times as you can before hitting the floor

Problem solved

LongMarch's picture

When DB hits single digits, it'll be time to fix the wheelbarrow and load the nailgun.

Harlequin001's picture

Oh, this one's easy. Just print 52 x $1 Trillion dollar notes, and wait for the trickle down effect.

Fixed. See, I'm a genius. I know how this works.

Now, who's going to pay me $500,000 per year for fixing that one...

Oh, hang on, might have to have a desk next to Yellen. Maybe I'll just forgo the salary...

and wait while they try and fit 52Trillion brand new dollars/Euros into my few bars of gold and silver.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Harlequin001 Jul 10, 2016 7:00 AM

The collapse of DB can't happen soon enough.  Hopefully, it unwinds the whole derivatives market.

eatthebanksters's picture

Now that is a truly scary fucking thought...but it would certainly reset the markets.

WmMcK's picture

I thought we agreed on Pt coins, not bills.  I'm confused (again/still).

booboo's picture

Except when AIG was on the hook to Goldman for several billion for MBS bets and the taxpayers were anchored to the bill. Goldman gets payed, Goldman always gets payed and if Hildabeast is in office she will sell her and your grand baby in pieces if thats what it takes to make them money good

Arnold's picture

Goldie has her own public and private problems to keep her awake at night.

When the chutes open there will be some fails.

Arnold's picture

There are reasons that Jamie and Lloyd have their own bedroom slippers at the White House.

In reference to derivative instruments, quadrillion comes to mind.

Brought to you by the letter T, not B or M.

Singelguy's picture

AIG was on the hook for $10 billion to Goldman Sachs, $180 billion exposure overall. Each was paid out 100 cents on the dollar with no negotiation, courtesy of a loan from we the taxpayers. The good news is that AIG repaid that loan with interest. One of the few instances where the taxpayer profited.

SwapThis's picture

Am I wrong in thinking that such a counter party failure will have cascading effects into US derivative holders which are now backed by the taxpayers?


Scarlett's picture

GoldmanSachs Draghi buys it all up; can't let the poor bastards without jobs or bonuses...

Singelguy's picture

Derivatives are like nsurance policies, only much less regulated. For example, you can only insure a house or car that you own or have a vested interest. With derivatives, you can take out an insurance policy on your entire neighborhood so if you neighbor's house burns down, you get paid out too. However, just like the home owner, you have to pay premiums on that "insurance". In the case of derivatives, it is not houses and cars that are insured, but the value of stocks, bonds, and commodities. Also, just like an insurance policy, a derivative contract is valid for a fixed period of time, usually 6 months to a year.

The $52 T that DB has on its books is the total current value of all assets insured. Everything would have to drop to zero in order for DB to take a total loss which is unlikely. However, a drop of 50% is not unreasonable so the potential loss could be $26 T. What I have not been able to find out is how much revenue is generated in premiums for DB or any other bank for that matter. It is certainly substantial with little risk as long as the markets are propped up by central bank money printing.

Unwinding that position would not be that difficult. When an investor sells his position, he will likely cancel the correspondent derivative hedging so that disappears. DB could also choose to not renew derivative positions especially if the investor does not own or have a vested interest in the underlying asset. It would take some time but it is doable. If I recall correctly, DB's derivative position was $70 billion so they seem to be in the process of reducing their exposure with an accompanying loss of revenue.

Traderone's picture

Crystal clear to me now,  thanks for the education. 

rlouis's picture

"What I have not been able to find out is how much revenue is generated in premiums for DB or any other bank for that matter. It is certainly substantial with little risk as long as the markets are propped up by central bank money printing."


It's like picking up pennies in front of a steamroller

zhandax's picture

SG, you got the handle right but put the decimal in the wrong spot.  DB's derivative position is around $70 Trillion which is almost equal to everything the world produced last year.

Singelguy's picture

Oops. Freudian slip. My bad.

SwapThis's picture

Does anyone know the notional value of any CDS's that could trigger when/if DB goes poof? And who would be owing the payoffs?

fockewulf190's picture

Well, the squids over at DB don´t want that to happen sooooo....they hit the press with their magic solution:

Deutsche-Bank-Ökonom fordert 150-Milliarden-Programm der EU zur Bankenrettung

Deutsche Bank Economist (in this case the top bean counter for DB) demands €150 billion bank bailout program from the EU.

Capital injection for banks based on US example.

You can let Google translate it for you.  Its basically the Paulson pitch (again).  Same shit, different continent.

fockewulf190's picture

PS: No PM manipulation on that timeline?  Must not have been expensive enough.  Seems like that whole situation of DB turning on their fellow banksters was quickly eliminated from the public eye.  Central Bank pressure anyone?

wildbad's picture

DB is the black hole death star.  whether it is technically an implosion or an explosion won't matter much.  nothing will survive its brownout or quasar flash.


Germany is doomed as ar all other banks.  The €uro is finished.  They will try ineffective measure to spread oil on the waves but all measures will fail due to deep public mistrust of the evildoers and misLeaders.  The bail-in will fail causing a resort to bail out. The pitchforks will be taken out of the closets where they have been rusting for generations now.


The desperate calls from brussels will go unanswered and the €U dues will simply fail to be paid.  The €urocrats will slink home when their €200k jobs evaporate and will trry to blend in an keep their heads down , to no avail.

Their heads will rest on pikes as the surviving masses learn that they have been systematicall robbed for decades.


Gnashing of teeth, grinding of bone will replace summery picncs by the stream.  The once mighty will be brought down and will mourn their sins as theydie horrible slow deaths which continue long past the stilling of their black hearts.

Killdo's picture

I used to work on trading floors of German investment Banks in London -those traders were the most arrogant, deluded snobs I have ever seen

Government needs you to pay taxes's picture

Havent been ballin' with the Goldman Balsach prop desk, have you?

Killdo's picture

no I used to make trading apps for German banks

Placerville's picture

Couldn't happen to a nicer bunch of market manipulators, AKA Douches.


Thanks ZH for the article a few months ago about DB. Jan 2018 10 Puts were $0.95 and now $1.75.

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) JamesBond Jul 9, 2016 7:40 PM

Merkel invited the middle-east hordes to show up. They did.

What happens when Merkel runs out of other people's money? Good question. My guess is that Europe goes tits up.

Laowei Gweilo's picture

which is why Merkel will bailout DB imo

she's politically and idealgically more likely to do so than the US was pre-bank bailout

and not bailing out DB would basically destroy the German economy (and destroy her polital party's chances of ever being relected in the next decade) because Germany factories in general are incredibly in-debt with small (relative to their business size) business loans that would absolutely skyrocket in terms of rates. their whole 'resistanct' factory economy is built on loans and if DB goes under, it would be like taking out all the bottom bricks of a Jenga tower.

it's worse than China imo because at least in China, shadow lending has various different segments in the economy and the lending is done to grow -- not to survive. even without shadow lending, China would still be growing at a few percentage points. Germany without the factoring lending tho would be in an outright recession.

not only would DB going under being economic suicide, it would be social suicide because suddenly you'd have a far faaaar larger poor unemployed lower class. you'd probably see huge competition and resentment, even more than now, between white middle class factory workers and lower class immigrants now competing not only over culture but also McDonalds jobs. 

and that's just Germany.. DB going under would send a shit storm through the EU which is Merkel's darling, and probably even exponentially increase the likelihood of other countries leaving the EU, so they can devalue their currency to at least 'survive' -- I'd go as far as to say that after BREXIT, DB going under would quicker 'end' the EU than any other single country (other than maybe France or Germany lol) leaving the EU. 

not saying I think it's what should happen, what's 'right', ethical, or whatever... but I'd be surprised as all hell if Merkel doesn't go to hell and back to bailout DB.


Sandmann's picture

What does Merkel bail out DB with ? I know she knows as little about Double-Entry Bookkepping as you do, but where does she find the capital to bail out the banks ? Does she borrow from First Martian Bank ? Or the Venusian Credit Agency ?

itstippy's picture

Bundesbank, with Draghi's and Yellen's full blessing and behind-the-scenes funding.

jcaz's picture

If she could, she already would have bailed them out. 

DB is the walking dead.   It will take years to sort out the derivatives exposure.

Bundesbank won't go near this deal until the dust settles.

There will be massive resets in asset valuations,  back to where they SHOULD be.

Party's over.

fockewulf190's picture

Remember, she spent a shitload of political capital bailing out the Greeks.  The german public has NO patience for anymore bailouts, ESPECIALLY when they are being forced to pick up the massive tab for the whole immigrant shit-show she caused.  The AfD political party grew to the size it  currently is because of her political decisions.  Another bailout won´t happen before a BAIL-IN happens. 

Rubicon727's picture

The problems are more complex than one bail-out for DB. What about the Italian banks - do they receive a bail-out, too?

The height of hypocrisy is that it wasn't that long ago Greek and Cyprian banks were dealt with only to have the EU media ostricizing them for their poor management skills. You remember when the Germans and the media was hip-hip-hooraying how thrifty, wise and due diligence made Germans the envy of Europe?

Now it turns out, the epicenter of German Imperialism has a severe problem.

How do you think fixing this latest crack in the wall is going to work when smaller nations/banks are not allowed the same privileges. If this doesn't cause social turmoil, nothing will.

You know, if you have any sense of European history - imperial aims over there have been tried over and over. First it was the Roman Empire, then Charlemagne, followed by Napoleon and his designs, with Hitler taking another stab at ruling Europe. Well, it's history repeating itself, but in the vein of greed and power by these elite bastards.



Killdo's picture

Have you ever been to a McDonalds in Germany? We waited for about 15 min for a hamburger in Berlin - my friends told me it's normal (and it was not busy)

SR 16-12 FTW's picture

Prediction. DB goes under, as expected. Wreaks havoc in Germany. Germany forced to attempt to bail out DB (its too big, doesn't work). Backlash for the double standard by peripheral nations causes even more nationalism and more vote to leave. While they are voting to leave, the whole banking system collapses due to counterparty risk. Under the strain of a collapsed banking system, peripherals voting to leave, and migrants, the EU breaks up. This contagion spreads like wild fire through global financial markets because of the extreme liquidity that exists in the system (provided by your friendly local central bank). Fire sales everywhere lead to catastrophic losses. At this point sovereign debt becomes revalued with fundamentals. Governments go bankrupt or hyperinflate if they have their own currency. PMs through the roof. New monetary system is born.

Good luck.

JohnGaltUk's picture

I would have to agree with your prediction.

CB's have been plate spinning for too long now.

mkkby's picture

Except the US comes out of it smelling like a rose. 

As we've all seen now for 8 years, every crisis in europe results in scared money running to dollar assets.  USD up, bonds up, stocks up, real estate up...  fucking baseball cards are probably up as well.

DB stock and bond holders will get an ass raping.  Except the important counter parties.  Important means having a goldman relationship.

Matteo S.'s picture

At least as important as DB is the bomb of the regional banks (landesbanken). It is not a coincidence that Germany refused its regional banks to be under the scrutiny of the european bank union.

And these regional banks are the core of Germany's industry. They subsidize german exporting mittelstand. That's why their books are rotten and that's why they are even more touchy than DB.