Frankfurt – The financial markets have breathed a collective sigh of relief Friday afternoon when there is the widespread indiscretion, collection by the agency Afp and still not confirmed, that Deutsche Bank would have reached an agreement with the Department of Justice of the United States to pay a fine of $ 5.4 billion instead of the $ 14 billion that was initially requested. In addition to the amount, an element that favours the German bank is under the impression that negotiations with the Us administration (which relates to misconduct in the placement of securities-securitised) may have a relatively short time. It is possible that the Department of Justice want to end the process before the presidential elections in the United States at the beginning of November, which would remove a source of enormous uncertainty about the future of the Deutsche Bank, which in recent weeks has violently destabilized the actions. The story, however, could get complicated if the american authorities decide to close, with only one package, also negotiated with other european banks involved, such as Barclays and Credit Suisse.
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If $ 14 billion would have represented a blow very heavy for the accounts of the institute of Frankfurt, and almost certainly forced a capital increase, the figure circulated on Friday afternoon could fit in a size more tolerable. Deutsche Bank has set aside 5.5 billion euros for the solution of inquiries, and cases in which it is still involved (after having been with the bank over the past few years has already paid for several scandals, the fines higher authorities of the various Countries) and has an additional 1.7 billion. In addition to negotiations under way with the law in the Usa, however, remain pending in at least three other events of considerable importance (including an investigation in Russia), the chief executive officer of the bank John Cryan said he want to solve it fast.
DBKGn.DE (Source: Thomson Reuters)
The sharp fluctuations of the market during these weeks (in the one-day Friday, the shares have lost 9% and then gain to 6.4%, the subordinated debt has fallen to new lows, the cost of insurance against default has gone up) and the fall of 50% in the Stock exchange from the beginning of the year reveal, however, that investors continue to believe Deutsche Bank is extremely fragile: by way of comparison, the fall in the index of actions of banks in Europe was about half that of the German bank. “The bank is approaching a crisis of confidence in general, but we are not there yet,” says Jacob Funk Kirkegaard, economist at the Peterson Institute in Washington.
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If the majority of analysts is convinced that the bank is certainly on the verge of collapse and that it will probably not have need of the aid of Been ventilated in the last days (legally possible, but politically toxic for the chancellor Angela Merkel, both on the domestic front, both the european one, after the hard line taken on Italian banks, as stated today in the German press), it is also a widespread belief that you will need as soon as to a capital increase and that it may announce it once it’s closed the match with the Department of Justice, Usa. “Recent events have underlined that the current business model of Deutsche Bank is untenable, he Kirkegaard – Simply can’t be allowed to operate with a budget of 1,500 billion euros and only a few tens of billions of euros of capital”.
The uncertainty of investors about the balance sheet of Deutsche Bank is also emphasized by the huge derivatives portfolio (over 600 billion), in which the markets ‘ attention is concentrated on the active so-called level 3, amounting to 28.8 billion euros, the value of which is calculated on the basis of internal models and is considered by many investors to opaque, in addition illiquid. Part of one of these positions, according to information gathered by the Sole 24 Ore, the financial sectors in London and Frankfurt, a "bet" on interest rates that leads to the Deutsche Bank with a loss as long as interest rates remain at current levels near zero.
In the past few months, both Cryan, is the chief economist of the bank, David Folkerts-Landau, were among the critics more strident policy of low interest rates of the european central Bank. The fears on the issue of the assets of level 3, however, are not shared by all analysts of the market, arise from the fact that in the face of these assets in the capital of the bank (Cet1) is only € 56 billion.
The other unresolved question is the strategy of the bank. After starting, with the acquisition of Postbank, and the strengthening of retail business, a diversification from investment banking, which in the past has taken most of the profits, but that is also at the origin of the scandals that Deutsche is paying a high price and become more expensive with the new rules after the crisis, the management has then made a running back, announcing the sale of Postbank and the closure of hundreds of branches. In Germany, DB is struggling to compete with the savings banks, while in international markets has lost ground to competitors in the us. Asset management is considered one of the strengths of the future, is now identified as a possible object of sale to strengthen capital.
a possible increase of the capital markets is discussed the more the "when" that the "if"), the bank shall be present, having solved in a convincing way to these uncertainties.
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