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katastrofa


Total Posts: 359
Joined: Jul 2008
 
Posted: 2016-09-30 10:53
It will be very hard politically for Merkel to bail them out. If you think that she will "do what she must" in the end, you do not understand how stubborn the Germans can get.

AndyM


Total Posts: 2308
Joined: Mar 2004
 
Posted: 2016-09-30 11:50
I always find national stereotyping to be the best way to analyse any distressed financial institution as well...

I used to be disgusted; now I try to be amused...

Cheng


Total Posts: 2819
Joined: Feb 2005
 
Posted: 2016-09-30 11:51
Imho Deutsche will need to raise capital, no matter what happens. Cryan said he wants to have 12.25% CET1 by 2019. Now, if my numbers are correct the minimum requirement would be 12% IF you don't add any additional buffers (like counter-cyclical). Besides nothing should go wrong on the way.

Now, while you are at it what is a billion or two more among friends. I am looking forward to the rhetorical gymnastics why the BRRD can be circumvented (but not for Italian banks).

"He's man, he's a kid / Wanna bang with you / Headbanging man" (Grave Digger, Headbanging Man)

Martinghoul


Total Posts: 852
Joined: Oct 2008
 
Posted: 2016-09-30 13:41
Yeah, this is going to be good old German fun 'n games... It's all just sooooo very interesting, again.

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

chiral3
Founding Member

Total Posts: 4986
Joined: Mar 2004
 
Posted: 2016-09-30 14:59
I have been in touch with DB IR a couple of times this week. They are doing a good job providing information. I watched the flattening and wasn't too concerned. I agree with their assessment of why it doesn't matter much. Not sure what the perspective of certain buy-side players was. Clearly not their CSAs. My MTM is fully collateralized.

Nonius is Satoshi Nakamoto. 物の哀れ

Tradenator


Total Posts: 1579
Joined: Sep 2006
 
Posted: 2016-09-30 15:48
ZeroHedge is bearish, so BUY!

Martinghoul


Total Posts: 852
Joined: Oct 2008
 
Posted: 2016-09-30 15:58
The story yesterday was pretty stupid. It had nothing to do with the CSAs. Given that it was specifically talking about listed derivatives, I am not too surprised by the idiocy.

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

Kitno


Total Posts: 341
Joined: Mar 2005
 
Posted: 2016-09-30 23:42
[Duplicate post removed]

Salut toi, je vais au Social Club avec des amis ce soir, c'est au 142 rue Montmartre. J'ai mis ta robe préférée. Viens me trouver.

Kitno


Total Posts: 341
Joined: Mar 2005
 
Posted: 2016-09-30 23:42
I agree with the situation we are in being illogical. Sadly that disregards banking is about confidence and if you cannot robustly address your investors' concerns it's academic and you'll cease being a viable entity.

Talking about solvency, liquidity and capitalization is academic when your senior funding becomes unsustainable.

Salut toi, je vais au Social Club avec des amis ce soir, c'est au 142 rue Montmartre. J'ai mis ta robe préférée. Viens me trouver.

Nonius
Founding Member
Nonius Unbound
Total Posts: 12666
Joined: Mar 2004
 
Posted: 2016-10-01 15:40
can someone explain why French bank CDS still extremely tight?

Chiral is Tyler Durden

EspressoLover


Total Posts: 224
Joined: Jan 2015
 
Posted: 2016-10-01 19:07
> Sadly that disregards banking is about confidence and if you cannot robustly address your investors' concerns it's academic and you'll cease being a viable entity.

I definitely have no expertise in this area, so take what I say with a grain of salt. But my understanding is that the sizable majority of DB's funding is secured credit. The issue with Lehman wasn't that people lost faith in the entity, but they lost faith in the collateral. That's not an issue with DB, as the collateral's mostly quality sovereign bonds, not CMOs.

On the political side, I think the DOJ's just going to arbitrarily adjust the size of the fine until DB's spread is under distress levels. No way that Obama wants to bookend his presidency with another financial crisis. Eighth-year Obama has seen some shit, and is definitely way less anti-establishment than when he started. There's an instructive analogy here with his veto of the Saudi sovereign immunity bill. The administration's much more interested in preserving stability, rather than uncompromising punitive justice.

Tradenator


Total Posts: 1579
Joined: Sep 2006
 
Posted: 2016-10-01 19:34
Don't forget the VW thing too.

Kitno


Total Posts: 341
Joined: Mar 2005
 
Posted: 2016-10-02 01:32
@EspressoLover DB's already in the slow car crash vicious circle. On Friday DB's senior unsecured debt was trading around E+300 on a flat curve. That's not sustainable when lending to corporates or mortgages at E+200. It has a big US business so USD funding...cross currency basis ticking up, domestic depositors getting worried, potential rating cuts/haircut increases, institutional clients withdrawing funds (hitting revenues - spiraling costs is management's core focus).

We've had all sorts of banking crises since the Medicis for all manner of reasons but it all comes back to a loss of confidence. Everyone looks to a replay of the past but it never quite happens.

Salut toi, je vais au Social Club avec des amis ce soir, c'est au 142 rue Montmartre. J'ai mis ta robe préférée. Viens me trouver.

drews


Total Posts: 284
Joined: Jun 2004
 
Posted: 2016-10-02 20:30
Not a funding/liquidity expert, but I think I've read that Lehman had $11bn cash around its collapse. Now DB has (from what I read on Bloomberg) ~$250bn. As to CDS, also haven't looked at it much for the last 10yrs, but from what I hear the market is just not there anymore. What size of DB 6months protection can one buy these days? I saw something like 30bp bid/ask spread on around 300bps level. If it's very thingly traded I guess those spread fluctuations or even the inversion of the curve is not that relevant?

I agree that reputational damage of staying in the news for long is probably the most significant, as many of the clients who leave may not come back anytime soon (and I mean not just PB clients but also OTC for e.g. derivatives), but I don't think DB is anywhere near collapse or its business model is any different from other banks (I mean former "IBs" with no significant Wealth Mgmt/Private Bank or deposit base)

Kitno


Total Posts: 341
Joined: Mar 2005
 
Posted: 2016-10-02 21:39
The title of this thread is a misnomer.

@Drews the cash is trading at those spread levels too so it's back to old school: if you can't hedge, sell the cash. The cash behaviour will be especially interesting in the next leg lower in a few weeks/months with the new mechanism of bail-ins and its distant probability of occurring inching higher.

I think the bigger issue is this isn't about DB it's a European problem about DB + a couple of others + Italian banks. What flavour that bailout? I have a feeling that at some point the sniff of bail-in risk will vacuum funding very fast eviscerating the last 10y regulatory 'work' hence more likely a bail-out. I don't like the wider EU context here i.e. the scope and what politicians think they have achieved. A least it was a UK decision to bail-out RBS avoiding a run.

I come back to confidence. DB has been under-performing for years and the $14bn figure only arose a couple of weeks ago a $5.6bn mooted settlement is anything but a solution. Cryan is still not delivering solutions to whatever investor concerns are.

Salut toi, je vais au Social Club avec des amis ce soir, c'est au 142 rue Montmartre. J'ai mis ta robe préférée. Viens me trouver.

EspressoLover


Total Posts: 224
Joined: Jan 2015
 
Posted: 2016-10-02 22:18
@Kitno

Thanks for the interesting points. I've bumped up my priors on a DB unwind.

Maybe the trade here is to sell short-dated DB vol and offset with the long-dated. Implied's are 10-15% higher for October than January. It seems like the adults in the room are in agreement that DB isn't collapsing next month. Demand for near-term protection seems mostly driven by dumb-money and prudence-signaling. If we're on the path to the end, we'll see spreads and vol widening before jump-to-default. Vega should outperform gamma until then. Of course, if it doesn't collapse, you just harvest a nice carry.

Strange


Total Posts: 1346
Joined: Jun 2004
 
Posted: 2016-10-03 01:42
If there is some sort of a relief rally (soft bailout, improvement or whatever) and it rallies, you will get destroyed on both short gamma and long vega.

It's buy futures, sell futures, when there is no future!

gill


Total Posts: 186
Joined: Nov 2004
 
Posted: 2016-10-03 16:43
The fact DB's cds trade at those levels is irrelevant-- they get money at zero from corporates/retail. I would be really susprised if we see something on the primary market at those levels.
I think DB will kick the can down the road till next recession. From where I sit it's difficult to see what may trigger such a catasrophic loss of confidence in the current market.

katastrofa


Total Posts: 359
Joined: Jul 2008
 
Posted: 2016-10-03 17:31
[edited]

AndyM


Total Posts: 2308
Joined: Mar 2004
 
Posted: 2016-10-04 11:03
The Greek banks are still (just about) breathing, but DB is going to collapse in a heap a la Lehman. Seems like the way to bet...

I used to be disgusted; now I try to be amused...

nsande


Total Posts: 612
Joined: Apr 2004
 
Posted: 2016-10-04 13:54

"Det nya räknesättet Aggression: - Ett plus ett är jävlar i mig fem!" "Alcohol and Calculus don't mix - never drink and derive"

drews


Total Posts: 284
Joined: Jun 2004
 
Posted: 2016-10-04 15:26
I'm with Gill on this one. I don't see how CDS are relevant nowadays when there's no liquidity in this market anymore and banks get ECB funding at zero or so rate irrespective of spreads (including cash bond prices) anyways. So DB with ~$250bn liquidity is definitely not Lehman.

As to the gradual deterioration (over month/yrs) I'm not sure how that would play out. I mean DB business model is no different from other (former) "IBs". If this model turns out to be unsustainable then it will affect many other similar players. In any case it would probably be restructuring/industry shift (with a time scale of years) rather than bail(out/in)

Martinghoul


Total Posts: 852
Joined: Oct 2008
 
Posted: 2016-10-04 16:55
I think Deutsche's business model is quite a bit more capital-intensive than others (so a lot more FICC than the others). This is just based on the stuff that I have seen.

I have a question, though... It seems that one of the big issues that is often mentioned in connection with DB is their lack of profitability. However, looking at the actual data, it appears that they reported reasonably positive revenues and EPS both for Q1 and Q2 2016. Has anyone who is wise in the ways of banks looked at those numbers in any detail?

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

Cheng


Total Posts: 2819
Joined: Feb 2005
 
Posted: 2016-10-04 17:24
Martinghoul, have a look at Return on Assets, i.e. Net Income (or Profit before Tax if you want to compare accross jurisdictions and avoid cheating there) divided by Balance Sheet volume. I remember figures (based on Net Income) between 0.2% and 0.5%. For reference, Wells Fargo delivers north of 1% (I think last time I checked they were at 1.3%). Look back a couple of years to get the full picture.

What this tells you is that Deutsche is not that profitable, but highly levered. Now take away the leverage (due to stricter regulations etc.) and see what remains...

"He's man, he's a kid / Wanna bang with you / Headbanging man" (Grave Digger, Headbanging Man)

Martinghoul


Total Posts: 852
Joined: Oct 2008
 
Posted: 2016-10-04 17:33
Thanks, Cheng... I guess I was just under the impression that the expectations were much worse.

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...
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