Deutsche Bundesbank's External Position in the EU: Saving Buba

External Position of the Deutsche Bundesbank in the EU

Source: Deutsche Bundesbank

Deutsche Bank Posts First Loss Since WW II

Breitbart
Deutsche Bank posts first loss since WWII, rejects state aid
Feb 5 09:12 AM

Germany's biggest lender, Deutsche Bank, on Thursday posted its first annual loss since World War II after a terrible fourth quarter but said it would survive the global meltdown without state aid.

Chairman Josef Ackermann said the bank did not require government assistance and would pull out of the financial crisis on its own.

Deutsche Bank reported a net loss of 3.9 billion euros (5.0 billion dollars) for 2008 after a massive loss of 4.8 billion euros in the fourth quarter alone. For 2007, Deutsche Bank have posted a record profit of 6.5 billion euros....

Ackermann added that he saw no "dramatic" risks in the bank's accounts.

In a statement earlier, he said "operating conditions in the (fourth) quarter were completely unprecedented and exposed some weaknesses in our business model.

He acknowledged being "very disappointed" at the quarterly figures but said that "since the trust and support of our shareholders is critical for us, we recommend a dividend for the year 2008 of 50 cents per share."

...Ackermann said he remained committed to the bank's business model, which is focused on investment banking, a once lucrative field in which Deutsche Bank is one of the global leaders.

The sector has suffered sustained turmoil since mid-2007 when the US subprime or higher risk home loan market collapsed, undercutting the derivative investment instruments which had been linked to it by the banks...

For the full year 2008, Deutsche Bank revised the total value of its assets lower by 7.0 billion euros, more than three times the 2007 write-downs of 2.3 billion euros.

In the fourth quarter alone, asset write-downs amounted to 5.3 billion euros.

Deutsche Bank Surprises Bond Markets By Failing to Redeem its Bonds

It really doesn't seem all that bad to us, compared with the US banking tradition of throwing yourself on the doorstep of the New York Fed and ringing the bell, threatening to collapse the economy until you are bailed out.


The Financial Post
Deutsche stuns market by delaying bond redemption
By John Greenwood and Jonathan Ratner
Wednesday, December 17, 2008

A move by Deutsche Bank to go against industry practice by passing up an opportunity to redeem a chunk of subordinated debt has escalated the level of turmoil in financial markets as investors worry that problems at the German financial services giant might be greater than imagined.

Meanwhile, at least one analyst is speculating that Canadian banks could follow suit on a portion of the more than $3-billion of bonds that they have coming due in the next few months.

Deutsche Bank stunned the market when it said on Wednesday it will not redeem 1-billion euros of callable bonds at the first opportunity. The debt does not mature until 2014, but it has a call date of January 2009, meaning the debt can be paid back as early as next month.

It is a long-time industry practice for banks to redeem such bonds on the earliest possible date, as proof of the soundness of their balance sheets.

Analysts said Deutsche is the first major player to break the tradition.

The move "raises some awkward questions about [the German bank's] financial position," said CreditSights analyst Simon Adamson. "But more than that, it is a signal that banks do not see a return to more normal funding conditions in the foreseeable future, and that is a damaging statement for the banking sector."

"This is a big deal in the bond market," said another analyst who asked not to be named, pointing out that investors have always taken for granted that such debt always gets paid back at the earliest opportunity.

Banks around the world are under the spotlight as investors try to figure out how this episode of the credit crisis will play out, whether other banks will copy Deutsche or whether it will end up as an isolated occurrence.

"We will see if any of the Canadian banks follow suit," said the analyst, adding that they will do so if they believe they can gain by it.

He said there could be several reasons for Deutsche's decision not to redeem. One possibility is that it simply needs the cash and is willing to pay the penalty for later payment in order to hold onto the money longer. A second possibility is that it already has sufficient funding to keep it going for a considerable period and can afford to take a step that would make it much more expensive to access the credit markets. (Oh yeah number two sounds likely - NOT - Jesse)

"Do you want to shut yourself out of the market, which is what you would do?" the analyst said.

You would also shut your competitors out of the market because the whole sector would likely be tainted....