Bank Watch, page-223

Will Deutsche Bank Initiate The Next Financial Crisis?

http://www.investing.com/analysis/deutsche-bank-to-initiate-the-next-“financial-crisis”!-200139877

Extracts from report below.

The chart below clearly shows the systemic risks emanating out of a Deutsche Bank collapse.


............

In 2007, Lehman had a leverage (the ratio of total assets to shareholder’s equity) of 31:1. At the time that Lehman filed for bankruptcy, it had $639 billion in assets and $619 billion in debt. Still, it caused a ‘systemic risk’ worldwide.
In comparison, DB has a mind-boggling leverage of 40x, according to Berenberg analyst, James Chappell.
He stated,

“Facing an illiquid credit market limiting Deutsche Bank’s (DBK) ability to deliver and with core profitability impaired, it is hard to see how DBK can escape this vicious circle without raising more capital. The CEO has eschewed this route for now, in the hope that self-help can break this loop, but with risk being re-priced again it is hard to see DBK succeeding.”

...............

The nominal value of derivatives risk that DB holds on its books is $72.8 trillion, according to the bank's April 2016 earnings report. What is astounding about this is that a single bank owns 13% of the total outstanding global derivatives, which was a staggering $550 trillion in 2015.

What is more concerning—and alarming—is that the market cap of DB is less than $20 billion.
Nonetheless, the nominal value of derivatives exposure does not mean that DB will have a default worth trillions of dollars, seeing as most of the contracts are covered by counterparties. However, when the domino effect is put into motion, we have witnessed how it engulfs the entire world into it.

If the domino effect does occur, Germany with its GDP of $4 trillion or the EU with a GDP of $18 trillion will not be in a position to gain control over it.

..............

The easy monetary policy of various central banks is the main reason for the banks holding such massive leverage. The “next financial crisis” will cause the central banks’ actions to be redundant and ineffective, as they will not be in a position to control this impending catastrophe. In such a situation, the world will revert to the only remaining resort left, and that is gold.

Is the market now telling us that the risk is over that Deutsche Bank will be the cause of the next financial crisis?.........mmmmm Eshmun