Spare a moment for Felix Vulis, chief executive of embattled miner ENRC. At pixel time, Kleinmanwire was reporting (exclusively, obvs) that both Deutsche Bank and Morgan Stanley have resigned as brokers to ENRC.
In the middle of a possible takeover bid and a very real SFO investigation… Read more
The WSJ has news: “Bank Made Huge Bet, and Profit, on Libor“. The bank in question being Deutsche. The huge bet and profit being in 2008 on a bunch of rates trades.
Of course other banks did and do trade rates, in size, but let’s cut straight to the WSJ graphic… Read more
Debates about asset valuation can quickly turn philosophical. The FT’s story on Deutsche Bank on Thursday provides fresh fodder, carrying allegations from three ex-employees that the bank failed to properly value certain credit derivative positions and thereby created a misleading impression of its health.
At first we thought, ‘umm, yeah, Deutsche Bank and others, no?’ But the mention of Berkshire Hathaway seemed an interesting twist. Read more
Deutsche Bank failed to recognise up to $12bn of paper losses during the financial crisis, helping the bank avoid a government bail-out, three former bank employees have alleged in complaints to US regulators.
That’s from a story by the FT’s Tom Braithwaite, Kara Scannell and Michael Mackenzie. Citing those ever-dependable people familiar with the matter, it seems three individual Deutsche staff went separately to the SEC in 2010 and 2011. What’s the collective noun for “whistleblowers.” Read more
warning update from Deutsche Bank on Tuesday (flashes via Reuters):
DEUTSCHE BANK AG PROVIDES PRELIMINARY UPDATE ON SECOND QUARTER 2012 RESULTS: COSTS IMPACTED BY CURRENCY MOVEMENTS Read more
Just in case the real trophies never get cast, here are the advisers to the
$90 $80 $70 $60 $55(?)bn putative merger between Glencore and Xstrata. Click to enlarge.
First there was the foul-up over competition issues. Unbelievably, Glenstrata had not factored in the likelihood of a referral to the European authorities. Read more
Arguably THE banking factoid of the year, by way of Espirito Santo’s review of Thursday’s Deutsche Bank conference call (see bold):
The conference call provided the first clear indication from management that reduced capital allocated to trading operations is impacting trading revenues in the IB. This has been a strong theme that we have highlighted to clients, which first arose as a concern in 4Q11. Read more
Choose your story.
From the WSJ just after 4pm London time: Read more
Deutsche Bank, whose chief executive decried the stigma of tapping ECB three-year liquidity last month, has borrowed at least €5bn and as much as €10bn from the latest LTRO, the FT reports. Investors briefed by the bank’s finance director and investor relations executives say it was persuaded by the economics of the financing to abandon its concerns. Josef Ackermann had said that Deutsche was “loathe to give up” its reputation for never having taken government money. ECB president Mario Draghi revealed on Wednesday that 460 of 800 banks that funded from the February LTRO were German. Read more
The auction process to sell Deutsche Bank Asset Management is faltering after JPMorgan and State Street withdrew from the bidding, making it more likely the bank will have to break up the business as part of a prolonged sale of the assets. Deutsche Bank had raced ahead with the sale process in the past week, narrowing interest from a wide range of potential bidders to a shortlist of a half a dozen, before the leading contenders withdrew. Ameriprise, another candidate to buy the business, is baulking at the price and could soon withdraw, the FT says, citing people familiar with the situation. Read more
Every government needs a thick slice of luck, and this week’s has come as Chris Huhne slid off the political road into the ditch. Ed Davey has a golden chance to drive away from an energy policy which might have been designed to make energy expensive and electricity unreliable. This deadly combination might be called the Windmill Solution to oil and coal dependency, and the former Energy Secretary spent his last months flailing around like a demented turbine trying to make the numbers add up.
While Huhne was tilting at windmills, the energy game has been changed utterly by the emergence of shale gas. This rapidly emerging technology promises relatively cheap and abundant natural gas for at least the next two decades. It has already broken the link between oil and gas prices. It promises to turn the US into an energy exporter, and remove the dependency on Russian gas for the states on its borders. Read more
Deutsche Bank has risked a clash with the European Central Bank by indicating it sees a stigma attached to the long-term help offered to banks to try to ease the eurozone’s funding crisis reports the FT. Josef Ackermann, chief executive, made clear that Deutsche might not take up the ECB’s next offer of unlimited three-year loans because it might be seen as tantamount to government aid that could damage the bank’s reputation. Mr Ackermann said Deutsche had not taken part in December and was reluctant to be seen as needing help. “The fact that we have never taken any money from the government has made us, from a reputational point of view, so attractive to so many clients in the world that we would be very reluctant to give that up,” Mr Ackermann told analysts on Thursday. Mr Ackermann also said: “I’m normally not a friend of carry trades and I don’t think we would borrow money to buy sovereign risks even if there is an attractive spread.” Read more
Deutsche Bank dropped to a fourth-quarter pre-tax loss after the crisis in the eurozone dragged down its trading and investment banking earnings, the FT reports. Germany’s largest bank by assets said revenues for the quarter were down 7 per cent to €6.9bn from the record fourth quarter of 2010. Net income of €186m, down from €605m a year ago, was helped by a €537m tax gain. Quarterly revenues from Deutsche’s private client and asset management division outstripped those from the corporate and investment bank, highlighting the turbulent trading conditions and the bank’s attempt to rebalance towards more stable earnings from retail banking. Revenues from debt sales and trading, normally the engine room of the bank, sank by 35 per cent while equity sales and trading revenues dropped 38 per cent year-on-year in the quarter. The bank’s corporate banking and securities division, which houses sales and trading as well as its advisory businesses, posted a €422m quarterly pre-tax loss, including €380m of charges related to lawsuits. Read more
Macquarie Group, Australia’s biggest investment bank, is vying with at least three companies to buy asset-management divisions from Deutsche Bank, Bloomberg reports, citing two people with knowledge of the matter. The deadline for second-round offers is next week, and the German lender aims to reach an agreement by mid-March, the report says. Other bidders are said to include JPMorgan, State Street and Ameriprise Financial.
Deutsche Bank is preparing to launch a fund to snap up investors’ illiquid or damaged holdings in hedge funds that have failed to recover since the financial crisis, the FT reports, citing people familiar with the launch. The fund, which Deutsche is launching in partnership with New York-based Rosebrook Capital, will set out to raise $500m The bank estimates that, three years after the collapse of Lehman Brothers, investors are sitting on between $80bn and $100bn of hard-to-sell hedge fund assets that could prove lucrative in the coming years. Big opportunities are being created by financial regulations such as Basel II and Solvency III, which are making banks and insurance companies forced sellers of problem assets. Read more
Major fallers across the continent (NOT just the banking sector):
Fitch Ratings has cut its long-term ratings for seven major banks in Europe and the US, warning that big financial institutions “are particularly sensitive to the increased challenges the financial markets face”, the FT reports. BNP Paribas and Deutsche Bank both had their long-term issuer default rating downgraded by one notch to A plus, while Bank of America, Citigroup and Goldman Sachs were downgraded from A plus to A. Barclays and Credit Suisse were downgraded by two notches to A, Fitch announced on Thursday evening. “Over time market conditions are likely to ease, but Fitch expects market volatility to remain above historical averages and economic growth in developed markets to remain subdued for a prolonged period. This makes many business lines in securities operations more difficult, due to lower activity and higher funding costs,” said Fitch, the smallest of the three major rating agencies. Read more
Deutsche Bank has launched the sale of its global asset management business following a strategic review, putting a price tag of about €2bn on it. Initial bids are due in the spring. As many as 50 parties have registered an interest, including Wells Fargo, the US bank, Royal Bank of Canada and Ameriprise Financial, the US business that has about $600bn under management and administration, the FT says, citing people familiar with the matter. Ameriprise has made no secret of its ambitions to expand. Columbia, its US business, has assets under management of $325bn while Threadneedle, its UK-headquartered business, manages $96bn in funds. Europe’s banks are under pressure from regulators to strengthen their balance sheets and their asset managers are coming up against new rules and restraints in the US and Europe. Read more
Well, not yours, obviously. But random market professionals in the City of London who in recent days have been contacted by the mighty Goldman Sachs.
From: Lloyd C. Blankfein [mailto:firstname.lastname@example.org]
Sent: 08 December 2011 19:33
Subject: Goldman Sachs requests your feedback: ADV solicitation materials from Goldman Sachs Read more
German police are investigating a suspicious envelope that was sent to the chief executive of Deutsche Bank Josef Ackermann on Wednesday, reports Reuters. A police spokesman in Frankfurt declined to say what was in the envelope but said a bomb disposal expert had been sent to the headquarters of Deutsche Bank, Germany’s largest bank. In New York, a senior USlaw enforcement official said it contained explosives. There is also increased police security at Deutsche Bank‘s offices in Manhattan, says NYT DealBook, citing NYPD spokesman Paul Browne, who said the device was addressed to Mr Ackermann. An X-ray of the package by the bank’s mail room revealed the explosive contents of the package, as well as shrapnel. The letter’s given return address was that of the president of the ECB. Read more
Josef Ackermann is to leave Deutsche Bank after a decade as chief executive after failing to win shareholder support to become the bank’s supervisory board chairman, the FT reports. The Swiss investment banker, one of the world’s most prominent financiers, will leave Deutsche when his contract expires in May. Speculation immediately arose about Mr Ackermann moving to UBS, Switzerland’s largest bank by assets. Mr Ackermann is a known admirer of Axel Weber, the former president of the German central bank, who is due to take over as chairman at UBS. However, senior executives at the Swiss bank said Mr Ackermann had been ruled out for the job as UBS chief executive or holding any post. Read more
The precedent set by the restructuring of Greek sovereign debt risks leaving banks more exposed to future financial crises of other countries, according to Deutsche Bank chief executive Josef Ackermann, who helped to orchestrate the so-called “private sector involvement” in the rescue plan for Athens. Banks and other bondholders that volunteer for a 50 per cent cut in the value of Greek sovereign debt could set a precedent for other sovereign haircuts, Mr Ackermann, the eurozone’s most prominent banking head, told the FT. He insisted the Greek PSI deal should be an “exception”, echoing the language of other bankers and politicians. “If you open up the Pandora’s box, then who is willing to invest in sovereign risk?” But the veteran Swiss-born banker also predicted voluntary agreements with private sector creditors would continue to be preferred to a “disorderly” sovereign default, which could trigger potentially disastrous claims on CDS. Mr Ackermann said it was now clear that sovereign CDS were of less worth than before. Read more
Citigroup, JP Morgan Chase, BNP Paribas, Royal Bank of Scotland and HSBC could face the steepest capital surcharges of 2.5 percentage points, in provisional plans drawn up by global regulators, Bloomberg reported. The list has been fleshed out as part of G20 plans to force banks to boost their reserves above minimum levels previously agreed by international regulators in a bid to further reduce systemic risks. Bank of America, Barclays and Deutsche Bank might face surcharges of 2 percentage points, Bloomberg said, citing a confidential draft of the plan. A simplified version of the plan of global systemically important financial institutions, which did not include surcharge plans for individual banks, was published on Friday 4 after the conclusion of the G20 meeting by the Financial Stability Board, FT Alphaville reported. Read more
Here’s something to ponder for the commute home, via Deutsche Bank:
One topic of conversation with investors is why realized volatility has been similar to levels during 2010 (the onset of the European sovereign crisis), whereas investor’s perceptions of the current crisis (as well as option implied volatility) suggest the crisis is closer to 2008/09 in scale and severity. Figure 7 makes it clear that current realized volatility (based on a standard “close-to-close” measure), is broadly in line with 2010 and early 2008 volatility spikes. Read more
Deutsche Bank’s third-quarter results, 2011:
- A €777m profit, double forecasts but down from €1.1bn in the second quarter (excluding charges from the Deutsche Postbank merger) Read more
Deutsche Bank’s credit exposure to Las Vegas casino operations has reached $4.9bn, not far off its $5.1bn exposure to peripheral sovereign debt in the eurozone, according to the FT. Deutsche maintains a $3.9bn credit facility with the Cosmopolitan casino, which the bank completed after the original developer defaulted on its loans. The banks also holds $1bn of debt and 25 per cent of the equity of Station Casinos. Las Vegas has been described as the “ground zero” of the ongoing collapse in US housing and construction, leading to severe strain on indebted casino developers. Read more
At a conference in the German capital, [Deutsche Bank chief executive Josef] Ackermann also said the bank’s obligation to hold Greek bonds had cost it 400 million euros this year.
That’s via Reuters. No one’s forcing Deutsche to hold the debt, or tender it into the voluntary bond swap, of course. Are they? We’ll highlight comments from Toxia chief executive Pierre Mariani this week: Read more
Banks based outside the US could be dragged into the American “Volcker Rule”, which bans proprietary trading, according to the latest draft of the rule and lawyers that were ploughing through leaked copies on Thursday, the FT reports. The rule bans US banks from trading for their own account and imposes strict limits on their ownership of hedge funds in an attempt to hive off the riskier parts of finance from the utility functions of banking. Non-US banks are supposed to be exempt but the latest draft forces the likes of Barclays, Deutsche Bank and Credit Suisse to have to pass a four-step test: a transaction must be “conducted by a banking entity that is not organised under the laws of the United States”; no party can be a US resident; no staff “directly involved” can be “physically located” in the US; and the transaction must be “executed wholly outside” the country. The rule – which was passed into law by last year’s Dodd-Frank regulatory overhaul and sent to the Fed and other regulators for detailed rulemaking – is due to be officially unveiled next week after months of behind-the-scenes wrangling between government agencies. Bankers, lobbyists and lawyers are scrambling to interpret the the leaked proposal, the WSJ says, which appeared late on Wednesday on the American Banker website.
As with UBS, there’s more than meets the eye to this Tuesday trading update from Deutsche Bank.
And we’re not talking about the missed €10bn pre-tax profit target (that’s no surprise) or another round of redundancies (again no surprise). Read more