Deutsche Bank

The Deutsche Bank Death Watch Has Taken A Very Interesting Turn

The biggest bank in Europe is in the process of imploding, and there are persistent rumors that the final collapse could happen sooner rather than later.  Those that follow my work on a regular basis already know that this is a story that I have been following for years.  Deutsche Bank is rapidly bleeding cash, they have been laying off thousands of workers, and the vultures have been circling as company executives desperately try to implement a turnaround plan.  Unfortunately for Deutsche Bank, it may already be too late.  And if Deutsche Bank goes down, it will be even more catastrophic for the global financial system than the collapse of Lehman Brothers was in 2008.  Germany is the glue that is holding the EU together, and so if the bank that is right at the heart of Germany’s financial system collapses, the dominoes will likely start falling very rapidly.

There has been a tremendous amount of speculation about Deutsche Bank over the past several days, and so let’s start with what we know.

We know that Deutsche Bank has been losing money at a pace that is absolutely staggering…

Deutsche Bank reported a net loss that missed market expectations on Wednesday as a major restructuring plan continues to weigh on the German lender.

It reported a net loss of 832 million euros ($924 million) for the third quarter of 2019. Analysts were expecting a loss of 778 million euros, according to data from Refinitiv. It had reported a net profit of 229 million euros in the third quarter of 2018, but a loss of 3.15 billion euros in the second quarter of this year.

If you add the losses for the second and third quarter of 2019 together, you get a grand total of nearly 4 billion euros.

How in the world is it possible to lose that much money in just 6 months?

If all they had their employees doing was flushing dollar bills down the toilet for 6 months, it still shouldn’t be possible to lose that kind of money.

When investors learned of Deutsche Bank’s third quarter results last week, shares of the bank went down about 8 percent in a single day.

Overall, the stock price has lost over a quarter of its value over the past year.

Unless you enjoy financial pain, I have no idea why anyone would want to be holding Deutsche Bank stock at this point.  As I have previously warned, it is eventually going to zero, and the only question remaining is how quickly it will get there.

We also know that Deutsche Bank has been laying off thousands of workers all over the world…

On July 8, 2019, thousands of Deutsche Bank employees across the globe arrived at their offices, unaware that they would be leaving again, jobless, just a few hours later. In Tokyo, entire teams of equity traders were dismissed on the spot, while some London staff were reportedly told they had until 11am to leave the bank’s Great Winchester Street offices before their access cards stopped working.

The job cuts, which totalled 18,000, or around 20 percent of Deutsche Bank’s workforce, were the flagship element of a restructuring plan designed to save the ailing German lender.

The day before those layoffs happened, most of those employees would have probably told you that Deutsche Bank is in good shape and has a very bright future ahead.

Just like we witnessed with Lehman Brothers, there is always an effort to maintain the charade until the very last minute.

But the truth is that anyone with half a brain can see that Deutsche Bank is dying.  There have been so many bad decisions, so many aggressive bets have gone bad, and there has been one scandal after another…

In April 2015, the bank paid a combined $2.5bn in fines to US and UK regulators for its role in the LIBOR-fixing scandal. Just six months later, it was forced to pay an additional $258m to regulators in New York after it was caught trading with Myanmar, Libya, Sudan, Iran and Syria, all of which were subject to US sanctions at the time. These two fines, combined with challenging market conditions, led the bank to post a €6.7bn ($7.39bn) net loss for 2015. Two years later, it paid a further $425m to the New York regulator to settle claims that it had laundered $10bn in Russian funds.

At this point, it is just a zombie bank that is stumbling along until someone finally puts it out of its misery.

Money is so tight at Deutsche Bank that they have even cancelled the Christmas reception for retired employees…

Times change. Once upon a time (2001, in fact), Deutsche Bank was able to book stars like Robbie Williams for its staff Christmas party, with a Spice Girl turning up too just because it was such a great party. Now, according to the FT, Christian Sewing has even cancelled the daytime coffee-and-cake Christmas reception for retired employees.

Of course saving a few bucks on coffee and cake is not going to make a difference for a bank with tens of trillions of dollars of exposure to derivatives.

Deutsche Bank is the largest domino in Europe’s very shaky financial system.  When it fully collapses, it will set off a chain reaction that nobody is going to be able to stop.  David Wilkerson once warned that the financial collapse of Europe would begin in Germany, and Jim Rogers has warned that the implosion of Deutsche Bank would cause the entire EU to “disintegrate”…

Then the EU would disintegrate, because Germany would no longer be able to support it, would not want to support it. A lot of other people would start bailing out; many banks in Europe have problems. And if Deutsche Bank has to fail – that is the end of it. In 1931, when one of the largest banks in Europe failed, it led to the Great Depression and eventually the WWII. Be worried!

Sadly, most Americans can’t even spell “Deutsche Bank”, and they certainly don’t know that it is the most important bank in all of Europe.

But those that understand the times we are living in are watching Deutsche Bank very carefully, because if it implodes global financial chaos will certainly follow.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. This article may contain opinions on political matters, but it is not intended to promote the candidacy of any particular political candidate. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.

A Bank With 49 Trillion Dollars In Exposure To Derivatives Is Melting Down Right In Front Of Our Eyes

Could it be possible that we are on the verge of the next “Lehman Brothers moment”?  Deutsche Bank is the most important bank in all of Europe, it has 49 trillion dollars in exposure to derivatives, and most of the largest “too big to fail banks” in the United States have very deep financial connections to the bank.  In other words, the global financial system simply cannot afford for Deutsche Bank to fail, and right now it is literally melting down right in front of our eyes.  For years I have been warning that this day would come, and even though it has been hit by scandal after scandal, somehow Deutsche Bank was able to survive until now.  But after what we have witnessed in recent days, many now believe that the end is near for Deutsche Bank.  On July 7th, they really shook up investors all over the globe when they laid off 18,000 employees and announced that they would be completely exiting their global equities trading business…

It takes a lot to rattle Wall Street.

But Deutsche Bank managed to. The beleaguered German giant announced on July 7 that it is laying off 18,000 employees—roughly one-fifth of its global workforce—and pursuing a vast restructuring plan that most notably includes shutting down its global equities trading business.

Though Deutsche’s Bloody Sunday seemed to come out of the blue, it’s actually the culmination of a years-long—some would say decades-long—descent into unprofitability and scandal for the bank, which in the early 1990s set out to make itself into a universal banking powerhouse to rival the behemoths of Wall Street.

These moves may delay Deutsche Bank’s inexorable march into oblivion, but not by much.

And as Deutsche Bank collapses, it could take a whole lot of others down with it at the same time.  According to Wall Street On Parade, the bank had 49 trillion dollars in exposure to derivatives as of the end of last year…

During 2018, the serially troubled Deutsche Bank – which still has a vast derivatives footprint in the U.S. as counterparty to some of the largest banks on Wall Street – trimmed its exposure to derivatives from a notional €48.266 trillion to a notional €43.459 trillion (49 trillion U.S. dollars) according to its 2018 annual report. A derivatives book of $49 trillion notional puts Deutsche Bank in the same league as the bank holding companies of U.S. juggernauts JPMorgan Chase, Citigroup and Goldman Sachs, which logged in at $48 trillion, $47 trillion and $42 trillion, respectively, at the end of December 2018 according to the Office of the Comptroller of the Currency (OCC). (See Table 2 in the Appendix at this link.)

Yes, the actual credit risk to Deutsche Bank is much, much lower than the notional value of its derivatives contracts, but we are still talking about an obscene amount of exposure.

And this is especially true when we consider the state of Deutsche Bank’s balance sheet.  According to Nasdaq.com, as of the end of last year the bank had total assets of 1.541 trillion dollars and total liabilities of 1.469 trillion dollars.

In other words, there wasn’t much equity there at the end of December, and things have deteriorated rapidly since that time.  In fact, it is being reported that a billion dollars a day is being pulled out of the bank at this point.

I know that most Americans don’t really care if Deutsche Bank lives or dies, but as the New York Post has pointed out, the failure of Deutsche Bank could quickly become a major crisis for the entire global financial system…

But the important fact to remember is that Deutsche Bank traded these derivatives with other financial firms. So, is this going to be another Lehman Brothers situation whereby one bank’s problems becomes other banks’ problems?

Pay close attention to this.

If the situation gets out of hand, the Federal Reserve and other central banks will have no choice but to cut interest rates even if it’s not the best thing for the world economies.

In particular, some of the largest “too big to fail banks” in the United States are “heavily interconnected financially” to Deutsche Bank.  The following comes from Wall Street On Parade…

We know that Deutsche Bank’s derivative tentacles extend into most of the major Wall Street banks. According to a 2016 report from the International Monetary Fund (IMF), Deutsche Bank is heavily interconnected financially to JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America as well as other mega banks in Europe. The IMF concluded that Deutsche Bank posed a greater threat to global financial stability than any other bank as a result of these interconnections – and that was when its market capitalization was tens of billions of dollars larger than it is today.

Until these mega banks are broken up, until the Fed is replaced by a competent and serious regulator of  bank holding companies, and until derivatives are restricted to those that trade on a transparent exchange, the next epic financial crash is just one counterparty blowup away.

As long as I have been doing this, I have been warning my readers to watch the global derivatives market.  It played a starring role during the last financial crisis, and it will play a starring role in the next one too.

The fundamental structural problems that were exposed during 2008 and 2009 were never fixed.  In fact, many would argue that the global financial system is even more vulnerable today than it was back during that time.

And now it appears that the next “Lehman Brothers moment” may be playing out right in front of our eyes.

Now more than ever, keep a close eye on Deutsche Bank, because it appears that they could be the first really big domino to fall.

About the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.

Why Is The Mainstream Media Suddenly Buzzing About “Another Global Financial Crisis”?

All of a sudden, the mainstream media is starting to sound a lot like The Economic Collapse Blog.  Throughout the Obama years, the mainstream media in the United States always seemed extremely hesitant to suggest that difficult economic times may be ahead, but now talk of “another global financial crisis” seems to be all over the place.  Is this because they truly believe that one is coming, or is it just another angle that they can use to attack Donald Trump?  In any event, it is undeniable that evidence is mounting that big trouble could be right around the corner.  European financial markets are already in meltdown mode, a major international trade war has just erupted, the worst “retail apocalypse” in modern U.S. history is accelerating, and our debt problems continue to grow with each passing day.  Normally the mainstream news is much more subdued than I am about all of this stuff, and so I was very surprised to see reporter James Pethokoukis come out with an article entitled “Here comes another global financial crisis”…

Investors are increasingly worried that an escalating political crisis in Italy could lead to a populist, euroskeptic government taking power. As a result, there’s rising uncertainty about whether the country might eventually abandon the euro currency zone or default on its giant debt pile. To make things worse, the Trump administration continues to toy with the idea of a trade war with Europe and China. That would be the last thing the global economy would need if the Italian situation deteriorates further. Debt crises and trade wars are a toxic combination.

And remember, this comes just days after George Soros ominously declared that “we may be heading into another major financial crisis.”

So what has changed?

Certainly, what is happening in Italy is starting to get everyone’s attention.  Here is more from James Pethokoukis…

Italy is the eurozone’s third-largest economy, 10 times the size of Greece’s. It also has the world’s third-largest sovereign debt market, some $2.7 trillion. Only Greece has a higher public debt-to-GDP ratio in the eurozone. My AEI colleague Desmond Lachman, a former International Monetary Fund official and Wall Street emerging market strategist, argues that Italy’s troubles have the potential to roil the global economy much like the 2008 Lehman bankruptcy. (The 10th anniversary of “Free Market Day” is coming!) America wouldn’t be spared.

And it isn’t just Italy.  Financial institutions all over Europe are deeply troubled, and that includes the largest bank in Germany.

On Thursday, Deutsche Bank’s stock price crashed to an all-time low.  This caused such a stir that the bank was actually forced to issue a statement about it.

I have been writing about the troubles at Deutsche Bank for a very long time.  When they finally go down for good, it is going to create a “Lehman Brothers moment” for the entire planet.  This week, there were two key revelations that led to the dramatic stock price decline.  The following comes from Wolf Richter…

This came after leaked double-whammy revelations the morning: One reported by the Financial Times, that the FDIC had put Deutsche Bank’s US operations on its infamous “Problem Bank List”; and the other one, reported by the Wall Street Journal, that the Fed, as main bank regulator, had walloped the bank last year with a “troubled condition” designation, one of the lowest rankings on its five-level scoring system.

Meanwhile, the other major factor that has investors starting to panic is the beginning of an international trade war.

It takes a great deal to get the Canadians upset, but they have already retaliated against the tariffs that the Trump administration just imposed on them…

Canada will retaliate against new U.S. tariffs by imposing its own trade barriers on U.S. steel, aluminum and other products, Canadian Foreign Minister Chrystia Freeland said Thursday.

Freeland said Canada plans to slap dollar-for-dollar tariffs on the U.S. The Nafta partner’s proposed import taxes would also cover whiskey, orange juice and other food products alongside the steel and aluminum tariffs.

And it is expected that we will see retaliation from the Chinese, the Europeans and Mexico shortly.  All of this is causing a great deal of consternation on Capitol Hill, and it could mean big trouble for Republicans in November.

At the same time all of this is going on, this week we learned that 13 of Bank of America’s 19 “bear market indicators” have now been triggered.  The following summary comes from Zero Hedge…

Specifically, the following indicators have now been triggered, with the latest 2 bolded:

  • Bear markets have always been preceded by the Fed hiking rates by at least 75bp from the cycle trough
  • Minimum returns in the last 12m of a bull market have been 11%
  • Minimum returns in the last 24m of a bull market have been 30%
  • 9m price return (top decile) vs. S&P 500 equalweight index
  • Consensus projected long-term growth (top decile) vs. S&P 500 equalweight index
  • We have yet to see a bear market when the 100 level had not been breached in the prior 24m
  • Similarly, we have yet to see a bear market when the 20 level had not been breached in the prior 6m
  • Companies beating on both EPS & Sales outperformed the S&P 500 by less than 1ppt within the last three quarters
  • While not always a major change, aggregate growth expectations tend to rise within the last 18m of bull markets
  • Trailing PE + CPI y/y% >20 in the prior 12m
  • Based on 1- and 3-month estimate revision trends; see footnote for more detail
  • Trailing PE + CPI (y/y%) >20 within the last 12m
  • In the preceding 12m of all but one (1961) bull market peak, the market has pulled back by 5%+ at least once

And here are the 6 indicators that have yet to ring the proverbial bell.

  • Each of the last three bear markets has started when a net positive % of banks were tightening C&I lending standards
  • Companies with S&P Quality ratings of B or lower outperform stocks rated B+ or higher
  • Forward 12m earnings yield (top decile) vs. S&P 500 equalweight index
  • A contrarian measure of sell side equity optimism; sell signal trigged in the prior 6m
  • A contrarian measure of buy side optimism
  • Does not always lead or catch every peak and all but one inversion (1970) has coincided with a bear market within 24m

Like so many others, I’ve got a bad feeling about all of this.

And so does best-selling author James Rickards.  He seems quite convinced that we are heading for the largest market collapse that anyone has ever seen…

Each crisis is bigger than the one before. In complex dynamic systems such as capital markets, risk is an exponential function of system scale. Increasing market scale correlates with exponentially larger market collapses.

This means that the larger size of the system implies a future global liquidity crisis and market panic far larger than the Panic of 2008.

Today, systemic risk is more dangerous than ever. Too-big-to-fail banks are bigger than ever, have a larger percentage of the total assets of the banking system and have much larger derivatives books.

It has been 10 years since 2008, and conditions are definitely ripe for another great financial crisis.

Stay frosty my friends, because it looks like events are going to accelerate greatly in the months ahead.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

European Implosion Sends Panic Through Global Markets As George Soros Warns ‘We May Be Heading For Another Major Financial Crisis’

I told you to keep your eyes on Europe.  On Tuesday, widespread panic shot through European financial markets and this deeply affected U.S. markets as well.  The Dow Jones industrial average fell 391 points, and at this point the Dow and the S&P 500 have been down for three trading sessions in a row.  But the big news is what is happening over in Europe.  Tuesday’s crash represented the largest one day move for 2 year Italian bonds ever, and Italian bank stocks are now down a whopping 24 percent from their April highs.  Overall, European banks have fallen a total of 11 percent over the last four days, and it isn’t just banks in troubled countries such as Italy and Spain that are hurting.  The biggest bank in Europe, Deutsche Bank, just keeps on tumbling and is now just barely above all-time lows.  A few days ago when I wrote that the next global economic crisis “could be just around the corner”, there were some people that criticized me for making such a statement.  Well, as you will see below, now this fact has become so obvious that even George Soros is saying it.

Those that are ignoring what is going on in Italy are making a tragic mistake.  Italy is the third largest economy in the eurozone, and even the Wall Street Journal is admitting that its bond market is “in meltdown”…

Risk aversion is back. Italy is the focal point, with its bond market in meltdown, its politics in crisis after President Sergio Mattarella blocked the formation of an antiestablishment government, and its credit rating under threat.

That is all now making bigger waves: Europe’s deepening troubles and disappointing global growth signals are sparking a sudden rally in haven bonds like U.S. Treasurys.

The next financial crisis has already arrived in Europe, and the primary reason for this crisis has to do with the giant mess that Italy’s government has become.  The following summary of the current situation comes from CNBC…

Italy has been without a government since an inconclusive vote in early March, with anti-establishment political groups abandoning their efforts to form a coalition over the weekend amid a dispute with the country’s head of state.

President Sergio Mattarella, who was installed by a previous pro-EU government, refused to accept the nomination of euroskeptic candidate Paolo Savona for economy minister on Sunday.

Instead, he set the country on a path to another snap vote by appointing former International Monetary Fund (IMF) official Carlo Cottarelli as interim prime minister.

Of course the Italian parliament will never accept Cottarelli, and it looks like we are heading for snap elections in either July or August.

What is at stake in these elections is of the utmost importance to all of Europe.  As Politico recently discussed, if the Italian people continue to move toward anti-establishment parties we could actually see Italy leave the euro or even leave the EU altogether…

Italy, the third-largest EU power once Britain leaves, may sooner or later be run by two parties who agree on little other than their apparent eagerness to break stuff. It could be Italy’s debt — a default in the trillions of euros. It could be the euro, if they follow through on past promises to hold a referendum on membership in the single currency. And what’s ultimately broken could be the EU as we know it, if any such referendum goes against Brussels, as most that have been held have done.

The EU survived Brexit, but there is a lot of doubt as to whether it could also survive a defection by Italy.

During a speech on Tuesday, George Soros soberly assessed the current state of affairs in Europe.  According to Bloomberg, at one point he stated that “we may be heading for another major financial crisis.”

It is unusual for Soros to have such a gloomy tone.  He really seemed to quite pessimistic about Europe’s future, and he even went as far to say that “everything that could go wrong has gone wrong”…

The stark warning from the billionaire money manager comes as Italian bond yields have jumped to multi-year highs and major emerging economies including Turkey and Argentina are struggling to contain the fallout from runaway inflation. Soros, who has been the object of ire by the government of his native Hungary, saved his gloomiest outlook for the EU.

“Everything that could go wrong has gone wrong,” he said, citing the refugee crisis and austerity policies that catapulted populists into power, as well as “territorial disintegration” exemplified by Brexit. “It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality,” he said.

I must admit that I agree with his assessment of the situation in Europe.  The EU most definitely is in “existential danger”, and I believe that we are in the beginning stages of the worst financial crisis in modern European history.

So what should be expect to see in the weeks ahead?

Well, here are three things to keep an eye on…

#1 The chaos is likely to continue for Italian financial markets.

#2 The euro is likely to continue to fall relative to the U.S. dollar.

#3 Trouble signs are likely to continue to erupt at European banking giants such as Deutsche Bank.

I have been warning about Italy, the euro and Deutsche Bank for a very long time, but because things didn’t fall apart right away a lot of people thought that the problems had been solved.

But just because something doesn’t happen in the short-term doesn’t mean that it isn’t going to happen.  The long-term trends that are destroying Europe’s financial system took a long time to mature, and we could all see what was happening, but now we have finally reached a major crisis point.

Of course the European elite could try to “extend and pretend” by pulling a few more tricks out of their sleeves, but at some point even they will lose control.  There is only so much that can be done, and those holding the reigns of power in Europe are almost out of ammunition.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

Deutsche Bank Collapse: The Most Important Bank In Europe Is Facing A Major ‘Liquidity Event’

toilet-paper-stock-market-collapse-public-domainThe largest and most important bank in the largest and most important economy in Europe is imploding right in front of our eyes.  Deutsche Bank is the 11th biggest bank on the entire planet, and due to the enormous exposure to derivatives that it has, it has been called “the world’s most dangerous bank“.  Over the past year, I have repeatedly warned that Deutsche Bank is heading for disaster and is a likely candidate to be “the next Lehman Brothers”.  If you would like to review, you can do so here, here and here.  On September 16th, the Wall Street Journal reported that the U.S. Department of Justice wanted 14 billion dollars from Deutsche Bank to settle a case related to the mis-handling of mortgage-backed securities during the last financial crisis.  As a result of that announcement, confidence in the bank has been greatly shaken, the stock price has fallen to record lows, and analysts are warning that Deutsche Bank may be facing a “liquidity event” unlike anything that we have seen since the collapse of Lehman Brothers back in 2008.

At one point on Friday, Deutsche Bank stock fell below the 10 euro mark for the first time ever before bouncing back a bit.  A completely unverified rumor that was spreading on Twitter that claimed that Deutsche Bank would settle with the Department of Justice for only 5.4 billion dollars was the reason for the bounce.

But the size of the fine is not really the issue now.  Shares of Deutsche Bank have fallen by more than half so far in 2016, and this latest episode seems to have been the final straw for the deeply troubled financial institution.  Old sources of liquidity are being cut off, and nobody wants to be the idiot that offers Deutsche Bank a new source of liquidity at this point.

As a result, Deutsche Bank is potentially facing a “liquidity event” on a scale that we have not seen since the financial crisis of 2008.  The following comes from Zero Hedge…

It is not solvency, or the lack of capital – a vague, synthetic, and usually quite arbitrary concept, determined by regulators – that kills a bank; it is – as Dick Fuld will tell anyone who bothers to listen – the loss of (access to) liquidity: cold, hard, fungible (something Jon Corzine knew all too well when he commingled and was caught) cash, that pushes a bank into its grave, usually quite rapidly: recall that it took Lehman just a few days for its stock to plunge from the high double digits to zero.

It is also liquidity, or rather concerns about it, that sent Deutsche Bank stock crashing to new all time lows earlier today: after all, the investing world already knew for nearly two weeks that its capitalization is insufficient. As we reported earlier this week, it was a report by Citigroup, among many other, that found how badly undercapitalized the German lender is, noting that DB’s “leverage ratio, at 3.4%, looks even worse relative to the 4.5% company target by 2018” and calculated that while he only models €2.9bn in litigation charges over 2H16-2017 – far less than the $14 billion settlement figure proposed by the DOJ – and includes a successful disposal of a 70% stake in Postbank at end-2017 for 0.4x book he still only reaches a CET 1 ratio of 11.6% by end-2018, meaning the bank would have a Tier 1 capital €3bn shortfall to the company target of 12.5%, and a leverage ratio of 3.9%, resulting in an €8bn shortfall to the target of 4.5%.

The more the stock price drops, the faster other financial institutions, investors and regular banking clients are going to want to pull their money out of Deutsche Bank.  And every time there is news about people pulling money out of the bank, that is just going to drive the stock price even lower.

In other words, Deutsche Bank may be entering a death spiral that may be impossible to stop without a government bailout, and the German government has already stated that there will be no bailout for Deutsche Bank.

Banking customers have a total of approximately 566 billion euros deposited with the bank, and even if a small fraction of those clients start demanding their money back it is going to cause a major, major crunch.

Deutsche Bank CEO John Cryan attempted to calm nerves on Friday by releasing a memo to employees that blamed “speculators” for the decline in the stock price…

Instead of doing what many have correctly suggested he should be doing, namely focusing on ways to raise more capital for the undercapitalized Deutsche Bank in order to stem the slow (at first) liquidity leak, first thing this morning CEO John Cryan issued another morale-boosting note to employees of Deustche Bank who have been watching their stock price crash to another record low, dipping under €10 in early trading for the first time ever. In the memo the embattled CEO worryingly did what Dick Fuld and other chief executives did when they felt the situation slipping out of control, namely blaming evil “rumor-spreading” shorts, saying “our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price. … Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.”

Just as important, Cryan confirms the Bloomberg report that “a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns.” As we explained last night, the concerns are very much justified if they spread to the biggest risk-factor for the German bank: its depositors, which collectively hold over €550 billion in liquidity-providing instruments.

If you would like to ready the full memo, you can do so right here.

One of the reasons why Deutsche Bank is considered to be so systemically “dangerous” is because it has 42 trillion euros worth of exposure to derivatives.  That is an amount of money that is 14 times larger than the GDP of the entire nation of Germany.

Some firms that were derivatives clients of the bank have already gotten spooked and have moved their business to other institutions.  It was this report from Bloomberg that really helped drive down the stock price of Deutsche Bank earlier this week…

The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have shifted part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person with knowledge of the situation who declined to be identified talking about confidential client matters.

“The issue here is now one of confidence,” said Chris Wheeler, a financial analyst with Atlantic Equities LLP in London.

So what comes next?

Monday is a banking holiday for Germany, so we may not see anything major happen until Tuesday.

An announcement of a major reduction in the Department of Justice fine may buy Deutsche Bank some time, but any reprieve would likely only be temporary.

What appears to be more likely is the scenario that Jeffrey Gundlach is suggesting…

But Jeffrey Gundlach, chief executive of DoubleLine Capital, said investors betting that Berlin would not rescue Deutsche could find themselves nursing big losses.

‘The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be,’ said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine.

It will be very interesting to see how desperate things become before the German government finally gives in to the pressure.

The complete and total collapse of Deutsche Bank would be an event many times more significant for the global financial system than the collapse of Lehman Brothers was.  Global leaders simply cannot afford for such a thing to happen, but without serious intervention it appears that is precisely where we are heading.

Personally, I don’t know exactly what will happen next, but it will be fascinating to watch.

Deutsche Bank Profit Plunges 98 Percent As The Outlook For ‘The World’s Riskiest Bank’ Darkens

Crash Arrow Down - Public DomainThe biggest and most important bank in the biggest and most important country in Europe continues to implode right in front of our eyes.  If you follow my work regularly, you probably already know that I issued a major alarm about Deutsche Bank last September.  Subsequently, Deutsche Bank stock hit an all-time low.  Then I sounded the alarm about Deutsche Bank again back in May, and once again that was followed by another all-time low for Deutsche Bank.  And then I warned about Deutsche Bank again in early June, and you can probably imagine what happened after that.  Over the past year, this German banking giant has literally been coming apart at the seams, and in so many ways it is paralleling exactly what happened to Lehman Brothers back in 2008.

Today, we got some more bad news from Deutsche Bank.  Compared to the exact same period last year, profits were down 98 percent.  A nearly 100 percent drop in net income spooked a lot of investors, and Deutsche Bank shares got hit hard on Wednesday.  Of course Deutsche Bank shares are already down by more than half over the past 12 months, and the financial sharks can smell blood in the water.

Just like Lehman Brothers in 2008, Deutsche Bank is essentially in panic mode at this point.  They recently announced that they will be closing 188 branches and that 3,000 workers will be losing their jobs.  But this could just be the beginning of the layoffs at the bank.  According to some reports, the bank could cut up to  35,000 jobs by the year 2020, and CEO John Cryan recently admitted that they “may have to accelerate cost-cutting measures“.

What makes all of this even more alarming is that Deutsche Bank is widely considered to be “the most dangerous bank” on the entire planet.  The following comes from a CNN article posted just today entitled “The world’s riskiest bank is in trouble“…

What is going on with Deutsche Bank?

Germany’s biggest lender was dubbed the world’s riskiest bank by the International Monetary Fund last month, just as one of its U.S. businesses failed a Federal Reserve stress test.

Its shares are down 45% this year, and on Wednesday it said second quarter profits were wiped out by a 98% slump in earnings. The stock fell 2.5% in Frankfurt.

The primary reason why Deutsche Bank is “the world’s riskiest bank” is because of the mammoth derivatives portfolio that is possesses.  It currently has 42 trillion euros of exposure to derivatives, which is an amount of money about 13 times the size of the entire German economy.

When Deutsche Bank finally goes down for good, it is going to be “the shot heard around the financial world”, and it will be a disaster many times greater than the collapse of Lehman Brothers in 2008.  Just consider what Jeff Gundlach had to say about the bank earlier this year…

“Banks are dying and policymakers don’t know what to do,” Gundlach said. “Watch Deutsche Bank shares go to single digits and people will start to panic… you’ll see someone say, ‘Someone is going to have to do something.'”

As I write this, shares of Deutsche Bank are sitting at just $13.63, and many experts are having a very difficult time finding any reason for optimism.  In fact, Edward Misrahi has stated that the bank is his number one short trade, and Jim Collins says that “it is just impossible” to recommend buying shares of Deutsche Bank even at this depressed level…

As an equity analyst, it is just impossible to recommend shares of a bank that is not growing revenue. So really, Deutsche is an untouchable, and the stock market is trying — to the tune of a 58% decline in DB’s market value in 12 months — to recalibrate Deutsche’s market capitalization to the true value of its assets net of liabilities. That’s a painful journey.

I don’t mean to just pick on Deutsche Bank.  Certainly there are a lot of other major banks around the globe that are also teetering on the brink right now.  Just take a look at Italy.  Basically their entire banking system is in the process of melting down.

But the utter collapse of Italy’s banking system won’t have the same kind of worldwide impact that the collapse of Deutsche Bank will.

Unlike some of his predecessors, CEO John Cryan is being honest about some of the struggles that Deutsche Bank is going through right now, and he admits that they may need to be “more ambitious in our restructuring”.  The following comes from Business Insider…

Cryan said in a statement (emphasis ours):

“We have continued to de-risk our balance sheet, to invest in our processes and to modernize our infrastructure. However, if the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring.”

He said something similar in a note to employees (emphasis again ours):

“Here I would like to speak plainly. If this weak economic environment persists, we will need to be still more ambitious in our restructuring. We will do everything in our power to accelerate the measures we have already planned.”

Yes, I know that the stock market in the United States has been setting all sorts of all-time record highs lately.

But that doesn’t change what is going on in the rest of the world one bit.

The financial crisis that has been gripping Europe, Asia, South America and most of the rest of the planet since the second half of last year is accelerating.

And it is inevitable that the U.S. is going to be experiencing some very real pain in the not too distant future as well.

So even though things may seem a bit quiet this summer in the financial world, the truth is that there is a whole lot going on under the surface.

Deutsche Bank is one glaringly obvious example of this, but there are many others all over the globe.  And not too long from now, the dominoes will begin to fall very rapidly.

‘Currency Crash’ Drives British Pound To A 31 Year Low As Deutsche Bank Sinks To The Lowest Level Ever

British Pound Brexit - Public DomainThe fallout from the Brexit vote continues to rock the European financial system.  On Wednesday, the British pound dropped to a fresh 31 year low as confidence in the currency continues to plummet.  At one point it had fallen as low as $1.2796 before rebounding a bit.  As I write this, it is still sitting at just $1.293.  Meanwhile, the problems for the biggest banks in Europe just continue to mount.  At one point on Wednesday Credit Suisse hit an all-time record low, and German banking giant Deutsche Bank closed the day at an all-time record closing low of 12.93.  Overall, Europe’s Stoxx 600 Bank Index closed at the lowest level in almost five years.  What we are watching is a full-blown financial meltdown in Europe, but because it is not personally affecting them yet, most Americans are not paying any attention to it.

The collapse of the British pound that we have seen since the Brexit vote has been nothing short of breathtaking.  In fact, CNN says that this “is what a currency crash looks like”…

This is what a currency crash looks like. The pound has slumped to $1.28, its lowest level in more than three decades.

Investors are dumping the pound following Britain’s vote to leave the European Union on June 23. The pound has dropped roughly 15% since the referendum day, when it reached $1.50.

After appearing to stabilize, the pound resumed its decline this week after three big asset management firms halted withdrawals from real estate investment funds.

Of course this is likely only just the beginning.  There are some analysts that are suggesting that the British pound could eventually hit parity with the U.S. dollar at some point.  We are seeing seismic shifts on the foreign exchange market right now, and this is going to affect trillions of dollars worth of currency-related derivatives.  It will be exceedingly interesting to see how all of this plays out.

Meanwhile, Deutsche Bank continues to get absolutely hammered.

If the biggest and most important bank in Germany is not completely imploding, then why does the stock price continue to crash time after time?

Since the start of 2016, the value of Deutsche Bank has fallen by half, and many have pointed out that the trajectory that it is on is very, very similar to Lehman Brothers in 2008.

My regular readers are probably sick and tired of hearing me warn about Deutsche Bank, so today I will let someone else do it.  According to an article that was just published by the BBC, Deutsche Bank is now “the most dangerous bank in the world”…

Deutsche Bank shares hit a new record low today. It’s value has halved since the beginning of the year.

So is it now the most dangerous bank in the world?

According to the International Monetary Fund – yes.

Last week, the IMF said that, of the banks big enough to bring the financial system crashing down, Deutsche Bank was the riskiest. Not only that, Deutsche Bank’s US unit was one of only two of 33 big banks to fail tests of financial strength set by the US central bank earlier this year.

At this point Deutsche Bank is scrambling to raise cash to stave off an imminent implosion.  Just today, I came across a report about how they plan to sell at least a billion dollars worth of shipping loans in order to bring in some much needed funds.  Many of the steps that they are taking are reminiscent of what Lehman Brothers tried to do just prior to their collapse, and that alone should tell you something.

At the same time all of this is going on, things in Italy just continue to get even worse.  As of this moment, approximately 17 percent of all bank loans held by Italian banks are considered to be “non-performing”.  In other words, they are absolutely swamped by bad debts.  At the height of the 2008 crisis, only about 5 percent of the loans held by U.S. banks were bad.  So what we are watching unfold in Italy right now could definitely be described as “cataclysmic”.

Since the Brexit vote, Italian banks have been hit harder than anyone else.  The following comes from CNN…

Shares in Italy’s Banca Monte Dei Paschi Di Siena have crashed 45% in 10 days, forcing regulators to temporarily ban short-selling in the stock. The bank has been given until Friday to come up with a plan to reduce its bad loans by 40% by 2018.

It’s not alone. Other Italian bank stocks have fallen by about 30% since June 23, when the U.K. voted to leave the European Union. Italian officials are trying to find ways to shore up the country’s financial system.

Italian banks have been choking on bad debt for years, but the U.K. vote has thrown their problems into sharp relief.

Personally, I have been amazed that the European financial system has been able to hold it together for this long.  A total collapse was inevitable, but I really thought that it would have started before now.  Up until this time we have seen small crisis after small crisis, but in 2016 the full-blown meltdown has finally arrived.

And this growing crisis in Europe is going to have a dramatic impact on the entire planet.  Everywhere you look the economic fundamentals are getting worse, and if you won’t believe me, perhaps you will believe this editorial by Tim Quast on CNBC…

The bottom line is that the fundamentals of the economy and market don’t look good: Whoever you’re listening to — the Federal Reserve, to the Organization for Economic Cooperation and Development, to the International Monetary Fund — hoary heads of the dismal science see deepening malaise worsened by the Brexit, creaky European banks, possible copycat flight from the euro zone — even a slowdown for the U.S.

Can a market characterized by declining money flows, weakening fundamentals and arbitrage that has posted no material gain in over 18 months gather steam? Anything is possible. But it’s not a sound conclusion.

Whenever I post an article about Europe, it tends to get significantly less response than many of my other articles do.

But I hope that my fellow Americans will start paying attention to this growing crisis, because it is going to deeply affect all of us.

What is happening to the European financial system right now is truly history in the making, and I believe that it is going to be one of the biggest news stories of the second half of 2016.

The Stock Market Crash Of 2016: Stocks Have Already Crashed In 6 Of The World’s 8 Largest Economies

Network Earth Continents - Public DomainOver the past 12 months, stock market investors around the planet have lost trillions of dollars.  Since this time last June, stocks have crashed in 6 of the world’s 8 largest economies, and stocks in the other two are down as well.  The charts that you are about to see are absolutely stunning, and they are clear evidence that a new global financial crisis has already begun.  Of course it is true that we are still in the early chapters of this new crisis and that there is much, much more damage to be done, but let us not minimize the carnage that we have already witnessed.

In general, there have been three major waves of financial panic over the past 12 months.  Late last August we saw the biggest financial shaking since the financial crisis of 2008, then in January and February there was an even bigger shaking, and now a third “wave” has begun in June.  Not all areas around the globe have been affected equally by each wave, but without a doubt this new financial crisis is a global phenomenon.

The charts that I am about to show you come from Trading Economics.  It is an absolutely indispensable website that is packed full of useful data, and I encourage everyone to check it out.

Let’s talk about China first.  The Chinese economy is the second largest on the entire planet, and since this time last year Chinese stocks are down an astounding 40 percent…

Chinese Stocks

As things have started to unravel in China, the Chinese have been selling off U.S. debt and U.S. stocks like crazy.  The following comes from Bloomberg…

For the past year, Chinese selling of Treasuries has vexed investors and served as a gauge of the health of the world’s second-largest economy.

The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, burnt through 20 percent of its war chest since 2014, dumping about $250 billion of U.S. government debt and using the funds to support the yuan and stem capital outflows.

While China’s sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines.

Unfortunately for China, their economy just continues to slow down, and George Soros is so alarmed by this and a potential “Brexit” that he has been selling off stocks and buying enormous amounts of gold in anticipation of an even bigger global downturn.

Japan has the third largest economy in the world, and over the past year Japanese stocks are down a total of 26 percent from the peak…

Japan Stocks

Personally, I have been extremely alarmed by what has been happening in Japan lately.  Japanese stocks were down almost 500 points last night, and overall the Nikkei is down a whopping 1,800 points so far in June.

Of course the Japanese economy as a whole is essentially a basket case at this point.  For a detailed analysis of this, please see my previous article entitled “Watch Japan – For All Is Not Well In The Land Of The Rising Sun“.

Germany has the fourth largest economy in the world, and over the past year their stocks have fallen 19 percent from the peak of the market…

German Stocks

The key thing to watch for in Germany are serious troubles at their biggest bank.  I wrote a long article about the slow-motion implosion of Deutsche Bank last month, and just this week Deutsche Bank stock hit an all-time low.

The fifth largest economy on the planet belongs to the United Kingdom, and since last June their stocks have fallen about 13 percent…

British Stocks

One week from today, the “Brexit” vote will be held in the UK, and if they vote to leave the EU that could have very serious economic and financial implications for them and for the rest of Europe as well.  For an in-depth look at this, please see my previous article entitled “June 23, 2016: The Brexit Vote Could Change EVERYTHING And Plunge Europe Into Financial Chaos“.

France has the sixth largest economy in the world, and over the past year French stocks are down 20 percent from the peak of the market…

French Stocks

The French economy is really struggling these days, and we have not heard much about it in the U.S. media, but there have been tremendous riots in major cities in France in recent weeks.

The seventh largest economy on our planet belongs to India.  Even though India is facing some very serious economic problems, their stocks are doing okay for the moment.  Even though stocks in India are down over the past 12 months, we have not seen a major financial crisis over there just yet.

But there is definitely a major crisis in the eighth largest economy in the world.  Italian stocks are down a staggering 32 percent from the peak of the market.  That means approximately a third of all stock market wealth in Italy is already gone…

Italian Stocks

Earlier this year, I wrote about the horrifying collapse of the Italian banking system that has greatly accelerated since the start of 2016.  It looks like virtually all of their big banks will ultimately need to be bailed out, and this threatens to become a far bigger crisis than the crisis in Greece ever was.

And let us not leave off the ninth largest economy in the world.  Not too long ago, CNN ran an article entitled “Brazil: Economic collapse worse than feared“.  So not only are they admitting that the ninth largest economy on the globe is collapsing, they are also admitting that it is even worse than what the experts had anticipated.

So did I leave anyone off the list?

Ah yes, I haven’t even addressed what has been going on in the United States yet.

U.S. stocks did crash last August, but then they recovered.

Then they crashed again in January, but then they recovered again.

Now U.S. stocks have been taking another tumble here in June, but we are being assured that there is nothing to worry about.

Meanwhile, the underlying numbers for the U.S. economy just continue to get worse and worse and worse.  If you have any doubt about this, please see the article that I posted yesterday entitled “15 Facts About The Imploding U.S. Economy That The Mainstream Media Doesn’t Want You To See“.

Hopefully this article will clear a lot of things up.  In this piece, I have presented undeniable evidence that a new global financial crisis has begun over the past 12 months.  We have not seen global stock declines of this nature since the great financial crisis of 2008, but much worse is still to come.

I would love to be wrong about that last part.

It would be wonderful if the worst was now behind us and good times for the global financial system were ahead.

Unfortunately, every single indicator that I am watching is telling me just the opposite.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

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