Another Warning that Deutsche Bank Is Near Blowout
Aug. 17, 2016 (EIRNS)—Warnings are continuing over the danger of a Deutsche Bank collapse bringing the banking system down with it.
In an interview in the Daily Express, hedge fund manager Brad Lamensdorf said Deutsche Bank is dangerously undercapitalized and highly debt-leveraged, and pointed to its anomalous recent action in selling its prized wealth-management business, Alex Brown.
"Why would you sell your crown jewel if you weren’t in trouble," Lamensdorf asked in the interview.
That sale was a rather desperate attempt to gain capital which the bank now cannot raise by selling shares on the market. When it released its second quarter report July 25, DB claimed it had gotten very near the 11% so-called "safe" level of capital, by selling Alex Brown & Co. A ratio of capital to "risk-weighted assets" is worthless enough to begin with. But DB also reported zero profit and a huge 20% year-to-year drop in revenue, in that report. And the report announced that the already severe cost-cutting program of CEO John Cryan would have to be intensified, signaling that revenue was falling at least as fast as costs—a bad sign.
"Deutsche is in more trouble than people realize," Lamensdorf said. Commenting on the fact that the bank’s share price has collapsed since 2008, Lamensdorf added: "It suggests something is very, very broken." While the market might be stable for the moment, Lamensdorf questioned—given that the bank is currently "very fragile in a very stable market"—what will happen to Deutsche Bank in even a 5-10% market "correction."