“I jessa geev the bank you know a leeetull press downwards to mekkada debt look not quite so ‘ow do you say, sheeet”
Ah the EU and its funny little ways with the law….how its loveliness goes on and on. But while Draghi fibs for Europe (no change there) the special pleading for Deutsche Bank is wearing thin….even among its own staff
The FT reports that Deutsche Bank was given special treatment in this year’s EU stress tests. These were the official all-above-board tests designed to make all those trouble-making doubters out there shut up about what a systemic mess the eurozone banking cartel is in.
And those very same test results have been prominently used in recent spin to counteract the impression of bigger woes than $14 billion fines given by disgraceful doom merchants like me for example. But it seems that Deutsche’s result was “augmented” by a special concession agreed by its supervisor, the European Central Bank, that allowed a $4 billion Chinese deal to be included….even though the deal hadn’t been done.
Rather, in fact, like the deal with the US Justice Department on the $14 billion fine that hadn’t
been done even begun. But not at all like the Spanish lender Caixabank – which also didn’t complete a €2.65bn sale of foreign assets…..and wasn’t allowed to include the deal in its figures.
“Stress testing methodologies should be applied uniformly and without any special treatment. This, of course, equally applies to banks that are systemically important, such as Deutsche Bank” opined Brussels tank-thinker Nicolas Véron. Well observed there, Nico; but you see, in the European Union all banks are equal, although bigger ones are more equal because they’ll probably blow the gaffe on the real situation.
Even including the deal that shouldn’t have been included because it hasn’t happened, DB’s tier one capital was only 7.8% after the the stress tests. Lehman went west in 2008 at a 13% level of T1C.
But still the hopeful counterspin pours forth. CEO John Cryan now says the lender may fail to be profitable this year (in Deutsche-speak that means ‘will make a loss’), and his head of Middle East business says the bank could steal market share off US rivals in the region, adding “lots of people still want to do business with us”. No, they do: honest to God and I swear on my beloved Rottweiller’s grave, they do.
“This is our peak year for restructuring costs,” Cryan pled yesterday. But insiders at the bank say the problem is that the restructuring isn’t changing much in the structure, as such. They say peripheral businesses are proving harder to sell than first imagined, and that only a third of the scheduled staff cuts have actually occurred. (The latter point is backed up by headcount numbers recently released by Deutsche).
Others argue that the organisation is rudderless. “There is no clear direction,” one section head says, “Nobody can tell you what sort of bank is supposed to emerge”. The IMF has reiterated the same doubts.
Deutsche Bank needs some spectacularly good news, and fast. It is not going to be forthcoming.