Deutsche Doldrums: German Behemoth On The Brink

in Equities by

In case you somehow missed it, Deutsche Bank is on the hook for $14 billion to the Department of Justice for allegedly (and we use that term loosely) mishandling risky MBS.

Amusingly, the bank says it won’t pay.


But it will pay. Something. We’re just not sure how much.

The legacy litigation costs for Deutsche and generally corrupt corporate culture (historically any way) are finally becoming too much for the bank to bear. And the Street isn’t showing any love. Here’s a snippet from a scathing Credit Suisse note:

“Even illustrated with consensus earnings (and our forecasts are below), capital ratios could build at too slow a level to satisfy investors. We think the 33% consensus payout for 2017 could be cut to zero because although DBK intended to restart dividends in that year, the CEO noted that the resumption of dividend payments after 2016 “will depend on circumstances at that time.”

“While at under 0.4x current TBV the valuation is exceptionally low versus peers and history, among global investment banks it is not greatly out of line with 2018 ROTE expectations considering the lack of distributions in the interim (ie, investors in peers should receive high-single-digit annual dividend or buybacks).”


(Chart: Credit Suisse)

Needless to say, this was about the last thing the beleaguered European banking sector needed.




And make no mistake, when it comes to “systemic” it’d be hard to find an institution that fits that description more than Deutsche Bank.

Between that and the bank’s “connections” in Washington, we’d imagine the figure will come in at pennies on the dollar versus $14 billion because you know, “too big to fail.”

Someone call Elizabeth Warren because this firm needs a good old fashioned “Pocahontas” tongue lashing.

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