Posts tagged "Too Big To Fail"
When will Deutsche Bank stop frittering away its capital?

When will Deutsche Bank stop frittering away its capital?

Last week, an article by Antoine Gara in The Street.com argued that Deutsche Bank should cut its planned dividend payments for 2013.  Recall that the bank has set a payout of €.75 per share, which the article notes exceeds the bank’s profits last year. Meanwhile, the bank’s recent earnings revision, which came about as a result of its decision to set aside an additional € 600 million for anticipated settlements of mortgage litigation and the Iran sanctions and LIBOR investigations, caused the Tier 1 capital ratio to fall from 8.0% to 7.8%.  According to Gara: Although Deutsche Bank could have minimized the capital hit of its earnings revision by cutting the dividend, the bank remains committed to a payout that would be unlikely to pass the Federal Reserve’s muster in the United States. Deutsche Bank’s rising legal costs and signs that regulatory probes may soon hit the bank’s pocket book... {read more}
New FBO rules impact on DB: No Big Deal?

New FBO rules impact on DB: No Big Deal?

  During its January 31st earnings call, the bank seemed to want it both ways—objecting strongly to the imposition of the new FBO rules requiring more capital in the U.S., and yet downplaying the bank’s need to move or raise capital. From transcript of the call: Jernej Omahen, Goldman Sachs analyst: The first question I’d like to ask relates to the Fed proposal. And I have to say so, and maybe it’s me, but I’m just confused because I don’t understand whether Deutsche Bank believes this is a big deal or whether you think it’s not a big deal. Because on the one hand you’re telling us we won’t have to raise any capital as a consequence of this, it’s not going to have a meaningful impact on our operations, and on the other hand you’re telling us this is such a big deal that it’s going to spike retaliation from European... {read more}
Stop us before we model again:  Is aggressive RWA modeling undermining Basel’s legitimacy?

Stop us before we model again: Is aggressive RWA modeling undermining Basel’s legitimacy?

Some might argue Basel standards were intended to make life easier for “universal” banks like Deutsche Bank—creating common standards across borders for global businesses.  And according to Chris Whalen of Institutional Risk Analytics, the Basel III standards have had another, more direct, benefit for “the hopelessly insolvent” DB: “If you measure the tangible equity of the entire DB group vs. total assets, what is known as a leverage ratio, the bank has lower capital than any large US bank. Only the canard of capital to “risk weighted assets” brought to us via Basel III allows DB to keep operating.” According to Dominic Elliot of Breakingviews, published in in The New York Times Dealbook, DB’s  “fancy footwork” (i.e. changes to their internal RWA models) accounted for a quarter of the reduction in risk-weighted assets announced during the bank’s January 31st analyst call.  But is it possible the bank’s creative RWA modeling... {read more}
Poll: Will Germany Break Up Deutsche Bank?

Poll: Will Germany Break Up Deutsche Bank?

It was reported by The Wall Street Journal that the German Finance Ministry, under the ruling coalition party, is planning to propose a new draft law that would break up Germany’s big banks, ring-fencing investment banking from customer deposits. Reports have also suggested that BaFin has asked DB to simulate a split of its consumer banking and trading businesses, along the lines recommended by the Liikanen group. {read more}