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eshmun

12,265 Posts.

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05/05/16

23:36

Post #: 17690856
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Originally posted by eshmun ↑

Where there is smoke there is fire. What was I saying about the connection between collateral, liquidity and valuations/pricing. Seems to be taking on some meaning in the context of Deutsche now. Hidden reserves? Remember the off balance sheet CDS and CDO's that brought us down last time during the GFC. They were assets until they weren't anymore when "values" caught up with reality and the assets became liabilities. Deutsche is now shopping around the moving parts of its business to scrap enough reserves together to meet government regulations on being able to pay out coupons before it can issue new Tier 1 debt. Remember Deutsche is the 4th most important bank in the world and it seems it's having trouble convincing the German regulators that it can pay coupons (interest) on bonds it intends to issue (if I've read this report correctly). Eshmun

This from Bloomberg yesterday.

http://www.bloomberg.com/news/artic...ays-hidden-reserves-available-for-at1-coupons

Deutsche Bank AG has “hidden reserves” that may help pay coupons on its riskiest bonds in a crisis, according to the German lender’s chief financial officer.

“What we do not disclose, and can’t disclose, are additional reserves” that may come from moving profits at subsidiaries or re-valuing assets on Deutsche Bank’s balance sheet, CFO Marcus Schenck said in a conference call on Wednesday. “Let me call it hidden reserves,” he said in response to an analyst’s request for clarity on what would be available in a crisis.

Deutsche Bank is trying to reassure investors it will be able to honor debt commitments as it prepares to sell junior bonds for the first time in over a year. Investor concerns that declining profitability and German accounting rules would prevent the country’s biggest lender from paying coupons on its so-called additional Tier 1 debt, sparked an industrywide selloff in February.

German banks can only make optional payments such as dividends, bonuses and coupons on the bonds if they have sufficient “available distributable items” and Deutsche Bank has thinner coverage than other major banks. Yields on its AT1s have risen this year and the cost of insuring against losses on its debt exceeds peers.

Deutsche Bank will hold a series of fixed-income investor meetings starting on Monday before a possible sale of subordinated, Tier 2 debt, according to a person familiar with the matter who asked not to be identified because the information is private.
“We are under no pressure to issue AT1 paper in the near future,” Schenck said. “We can easily wait more than a year or so.”

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Just wanted to highlight this comment from the previous post

“We are under no pressure to issue AT1 paper in the near future,” Schenck said. “We can easily wait more than a year or so.”

More than a year or so doesn't sound like a long time in the context of a bank this important and large. Eshmun
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Bank Watch, page-9

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