Looming Financial Crisis Dampens German Banker's Earnings

We would have to agree that there is another significant wave incoming a from different set of bad loans in this financial crisis.

Contrast Deutsche Bank's actions with those of its Wall Street counterparts and remember this in the fourth quarter when they start queuing up at the trough for bailouts, warning of martial law, food shortages, and a breakdown of the financial system.

The Obama economic team's handling of the banks is disgraceful, serving a few politically connected Wall Street firms at the expense of the nation's interests.

The banks must be restrained, and the system brought back into balance, before there can be a sustained economic recovery.

Bloomberg
Ackermann Says Bad Loans Are ‘Next Wave’ of Crisis
By Elena Logutenkova

July 31 (Bloomberg) -- Rising delinquencies among consumer and corporate borrowers are the “next wave” of the financial crisis and may affect banks that have avoided losses so far, said Deutsche Bank AG Chief Executive Officer Josef Ackermann.

“This crisis has consisted of a series of earthquakes, with changing epicenters,” Ackermann said late yesterday at an event in Zurich. “Bad loans are the next wave. Banks that have fared relatively well so far will also be affected by this.”

Deutsche Bank, Germany’s biggest lender, said this week it set aside 1 billion euros ($1.4 billion) for risky loans in the second quarter. The seven-fold increase in provisions and below- forecast revenue from trading sent the Frankfurt-based bank’s shares to the biggest decline in four months on July 28. (Why don't they just ignore such risks like the American banking system and keep the bonus machine rolling? - Jesse)

“We were struck by the 44 percent increase in problem loans in the quarter,” Morgan Stanley analysts Huw van Steenis and Hubert Lam said in a note today, cutting their rating on Deutsche Bank shares to “equal-weight” from “overweight.”

Deutsche Bank fell 1.30 euros, or 2.8 percent, to 45.39 euros in Frankfurt trading, making it the worst performer on the 63-company Bloomberg Europe Banks and Financial Services Index over the past five days with an 11 percent drop.

‘Crisis Not Over’

“The crisis is not over,” Ackermann said. “When one looks at the developments of global economic growth, then it can be expected that starting in the second half of this year we slowly move into the positive territory. But we’re still moving on a low level.”

Banks that were forced to take government aid and are now encouraged to increase domestic lending may be more in danger from rising loan defaults than companies that can expand internationally and diversify risks, Ackermann said.

Deutsche Bank “intentionally” reduced its balance sheet and risk-taking this year, he said. (No soup for you, Deutsche Bank employees. - Jesse)

“We were disciplined in our considerations about what risks which should take,” Ackermann said. “If we had played it out to the full extent, we could have earned significantly more.” (And if you were front running the DAX with high frequency trades using government funds you would be rolling in profits - Jesse)