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Duff Bank


spygirl

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Can’t read FT.. I’m too tight to subscribe.. 😉

So am I right in thinking this is shifting debt sideways to cook the books.. Does this fix anything other than moving debt off the books? 

Its still a spiral to 0 in the next downturn? Or a bailout? 

https://in.reuters.com/article/deutsche-bank-restructuring-usa/deutsche-bank-to-set-up-50-billion-euro-bad-bank-source-idINKCN1TI0Q3

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2 hours ago, macca said:

Can’t read FT.. I’m too tight to subscribe.. 😉

So am I right in thinking this is shifting debt sideways to cook the books.. Does this fix anything other than moving debt off the books? 

Its still a spiral to 0 in the next downturn? Or a bailout? 

https://in.reuters.com/article/deutsche-bank-restructuring-usa/deutsche-bank-to-set-up-50-billion-euro-bad-bank-source-idINKCN1TI0Q3

They are trying to unfuck a fuckup.

The biggy, as alluded to the commentators on the article, is the price and liquidity of the derivatives on DB book.

How can they get rid?

https://www.theguardian.com/business/2019/jun/17/deutsche-bank-plans-radical-overhaul-with-50bn-hived-off-to-bad-bank-reports

 

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On 17/06/2019 at 11:07, macca said:

Can’t read FT.. I’m too tight to subscribe.. 😉

So am I right in thinking this is shifting debt sideways to cook the books.. Does this fix anything other than moving debt off the books? 

Its still a spiral to 0 in the next downturn? Or a bailout? 

https://in.reuters.com/article/deutsche-bank-restructuring-usa/deutsche-bank-to-set-up-50-billion-euro-bad-bank-source-idINKCN1TI0Q3

You can read one free FT article a day but you have to enter it from Google, so just copy the URL into Google and search for it, then you can read it.

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sancho panza
On 17/06/2019 at 11:07, macca said:

Can’t read FT.. I’m too tight to subscribe.. 😉

So am I right in thinking this is shifting debt sideways to cook the books.. Does this fix anything other than moving debt off the books? 

Its still a spiral to 0 in the next downturn? Or a bailout? 

https://in.reuters.com/article/deutsche-bank-restructuring-usa/deutsche-bank-to-set-up-50-billion-euro-bad-bank-source-idINKCN1TI0Q3

The Mishtake

https://moneymaven.io/mishtalk/economics/ho-ho-ho-it-s-magic-deutsche-bank-market-cap-14b-to-spin-off-50b-in-assets-pEOHpNKMv0utjToOLwA2-A/

Ho Ho Ho It's magic: Deutsche Bank, Market Cap $14B to Spin Off $50B in assets

Please consider Deutsche Bank Plans Radical Overhaul With €50bn Hived Off to 'Bad Bank'.

Deutsche Bank has drawn up plans for a radical restructuring which will involve the creation of a “bad bank” to hold tens of billions of euros of toxic assets and a round of severe cuts to its investment banking operations, according to reports.

The bad bank would house or sell assets valued at up to €50bn (£45bn) comprising mainly of long-term trades that have been a major drag on the struggling bank’s balance sheet, the Financial Times reported, citing four people briefed on the plan.

Deutsche Bank has been beset by a series of crisis in the past year including money laundering allegations, failed merger talks with Commerzbank and concerns about the lender’s dealings with Donald Trump and his son-in-law Jared Kushner.

Derivatives Spin Off

If the headline sounds preposterous, the derivatives details as described by the Financial Times are even more amazing.

"While the derivatives destined for the non-core unit still provide some cash flow, all the profit on the deals — and therefore the associated bonuses for those who arranged them — were booked up-front."

Supposedly these $50 billion in derivative assets are actually productive, except for the fact that Deutsche Bank booked the profit up front.

Thus, the proposal is to spin off productive assets to the "bad bank" keeping what?

The Financial Times explanation is to keep its better bond business.

To top it off, Deutsche Bank supposedly has €260 billion in cash and liquid securities on hand.

Magic Steps Explained

  1. Deutsche Bank will spin off $50 billion in productive assets to a bad bank
  2. Deutsche Bank will keep its better performing assets
  3. Deutsche Bank has €260 billion in cash and liquid securities on hand
  4. Deutsche Bank has a market cap of $14 billion

Illusions

Bear in mind that deposits are liabilities. Banks pay interest on them. But in the topsy-turvy EU world, interest rates are negative. If so, the bank is gaining by holding deposits.

If the liquid securities are government bonds, those are highly likely to have a negative yield and the bank is losing on them. This is the foolishness of the ECB's negative interest rate policy.

The entire impact of item 3 rages from a likely a big nothing to a tiny gain or loss.

As for point one, even if the asset is performing, excess profits were booked on it. Spinning it off should result in a charge, even if someone else is willing to deal with the derivatives mess.

This spin off story makes perfect sense, in some magical alternate universe somewhere.

Mike "Mish" Shedlock

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Castlevania

Welcome to the world of mark to market accounting.

Those derivatives will mostly be uncollateralised and will have been completely mispriced in retrospect. Banks now calculate a charge when pricing derivatives for the probability of the counterparty defaulting, any funding mismatches etc - stuff that simply didn’t exist back in the mid 2000’s. In addition the amount of capital that must be held against such positions has increased significantly. 

I’d assume all the banks that had big derivative books in the run up to the financial crash will also have a pile of similar long dated “assets” sat on their balance sheets.

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US Fed quizzes Deutsche on ‘bad bank’ plans

https://www.ft.com/content/5f70594e-9463-11e9-b7ea-60e35ef678d2

We put the bad stuff in the bad bank. And keep the good stuff in the good bank.

The real questions are -

Why was this not done ~13 years ago?

Why are European banks holding so much junk EU bonds?

ECB/Europe have pissed away 12 years whilst the economic environment gets worse for the bulk of EUers.

Countries like Italy are even more fucked than they were in 2007.

 

 

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Castlevania
2 hours ago, spygirl said:

Why are European banks holding so much junk EU bonds?

They have to hold a set amount of liquid assets.

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https://www.ft.com/content/710323e0-99c1-11e9-9573-ee5cbb98ed36

Getting shot of 20% of German workforce.

One, DB  should have done this years ago.

Two, ECN QE strategy for banks laid bare - bank shrink, economy shirnks, ECB makes bank rates more negative, banks lay off more people, EU economy shrinks, ECB makes rates more negative, babnks lay off more people, EU economy shrinks.

Gormless fucking acedemic economists

 

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Deutsche said Mr Ritchie, its highest-paid executive, was leaving by mutual consent after more than 20 years at the bank. The 51-year-old South African is expected to depart with a pay-off of more than €11m after signing new five-year contract only nine months ago, according to Financial Times calculations based on Deutsche’s standard severance policy. He has been paid about €36m since his appointment to the executive board three years ago.

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One percent
18 minutes ago, spygirl said:



Deutsche said Mr Ritchie, its highest-paid executive, was leaving by mutual consent after more than 20 years at the bank. The 51-year-old South African is expected to depart with a pay-off of more than €11m after signing new five-year contract only nine months ago, according to Financial Times calculations based on Deutsche’s standard severance policy. He has been paid about €36m since his appointment to the executive board three years ago.

How fucking much?  o.O

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https://www.ft.com/content/5a0388e2-9f20-11e9-9c06-a4640c9feebb

top rated comment



Mostly Harmless 16 hours ago “With a total pay of €8.6m, Mr Ritchie was the lender’s best-paid executive last year, earning €1.6m more than his boss Mr Sewing and doubling his income from the year before, despite coming last among executives in achieving performance goals.“ And this is the heart of the matter. US and UK investment bankers have been plundering Deutsche Bank for two decades and overwhelmed provincial German incompetents were unable to reign them in. The bonus pool in NY and UK was basically paid for by bread and butter business in Europe. Now that the bread and butter business is in tatters thanks to the low interest environment and state-sponsored not-for-profit competition by Sparkassen, the whole thing blows up. As the joke in Frankfurt goes: “Deutsche Bank - the only time in economic history that labour exploited capital!” How Achleitner has not been teared and feathered and run out of town to ruin another company somewhere else is a miracle.

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On 17/06/2019 at 11:07, macca said:

Can’t read FT.. I’m too tight to subscribe.. 😉

 

I received an offer from Google Pay, six-months free FT standard subscription then normal price is 30 quid a month after that if I don't cancel it. Have to say I am underwhelmed so far  even though it's free and would be severely disappointed if I actually paid the 30/month. 

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On 17/06/2019 at 11:07, macca said:

Can’t read FT.. I’m too tight to subscribe.. 😉

...

In Google Chrome, open an incognito window and Cutnpaste the url in.  It'll ask you to accept cookies each time, because that's how they work out the 'one free article per day', but it'll forget each time you close the incognito window and reopen a new one.

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All the trading bits are being shut.

Derivative book being put in a bucket.

Expect scenes of 1000s being bin bagged.

Sell London property.

Buy Lidl..

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7 hours ago, Loki said:

Is this 'it'?

End of the beginning.

Or beginning of the end???

Its a massive wakeup cal lto European banking.

People banging on about 'Oh the banks will go to Paris|Dublin|Frankfurter

They wont. They are all off onto software.

The whole concept of big paying banks making money is just not possible outside of extremely boutique IB.

IB is just nto a large employee. And very cyclical.

Banks, by their nature, are an everyday, low earning utility.

Calling an IB boutique advisor a 'bank'

 

 

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Conference 1 month ago by the DB CEO - no big hint that there was going to be huge lay offs. Out comes the release that they are shedding 18,000 jobs today. What changed in one month or was it already pencilled in?

 

And they were running this team building challenge (?) today - perhaps this has a dual meaning.

 

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Chewing Grass

Where's Mutti, cant she pull out a few Billion from her knickers.

Surely the Germans are all in it together, solidarity and all that.

image.png.72cbec48b1513b709677ebda22b4accf.png

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13 hours ago, 201p said:

 

No, B wont.

Its not really systematically important.

Its does have some mruky derivatives bu they ought to be bale to run off.

The biggest fallout from DB is finsec employment outside of germany, as the staff beign laid off are 99% in UK or US. 

The more is more importnant and connected:

https://mobile.twitter.com/RaoulGMI/status/1147878009870983169

Roughly - Europe economy rly on bank finance, banks rely on interate rates spreads.

ECB ZIRP means banks destroy capital, so dont lend, so European countries dont get finance, so Europe does not grow, so ECB cuts rates, so banks destryo capital, so banks dont lend ....

Again, is having academic ecnomists in charge of the economy - bad idea.

In theory bailing out (or giving liquidity) to banks stops them going under. Except they horde the capital as they worry about going bust.

If you bail out  (European) banks you need to bail out the creditors to, which basically mean ECB has to pick winners, which becomes polcitical i.e. Europe has invented a centrally planned economy.

What the ECB should be doing is rasing rates and doling debt to consumers and companies

 

 

 

And the Eruofalls then Trump will kick off, and ban German exports.

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