Deutsche Bank’s Cryan Crying to Analysts – Demands Bailout !?$%

 

Picture Credit: Deutsche Bank’s Frankfurt HQ

In a hat tip to Nassim Nicholas Taleb for “Antifragility“, I am going to call this “Anti-Innovation.” In a sad echo of Wells Fargo’s tribulations, Deutsche Bank lashed out at analysts yesterday in reporting horrific results, admitting to a DOJ $14B fine (NOT $6B!), but failed to admit that they have been seeking a massive EU 150B bailout from the European Monetary Authority (EMA) since this summer ! Even the Deutsche Bank analyst thinks Deutsche Bank is the source of the market’s “volatility” !! DB says they “mis-priced” their derivatives exposure (AGAIN?). DB demand deposits plunged 13% as a MONTH ago! And this is the period when Deutsche Boerse sanctioned DB for failing to deliver PHYSICAL gold to fulfill their contracts.  The Bank of England JUST asked domestic and Italian institutions about their DB exposure (you’re kidding, right, now?) And DB blames Central Banks for its problems?? So what happens if the derivatives and Justice Department fine are just the tip of the iceberg? And what is Merkel does not step in with a bailout (money all spent on her “agendas”? No, this is NOT The Onion…. read the eFinancial Careers- where finance professionals go to look for employers where they would like to take their talents –  article below which made me spit up my “Morning Coffee !”

Deutsche Banks’ third-quarter earnings were good, largely because of a 14% year-over-year rise in bond trading revenue.

But during yesterday’s analyst call CEO John Cryan didn’t made it clear where the bank stands. He said that the “infuriating” flood of negativity stemming from the U.S. Department of Justice seeking a $14bn fine for allegedly mis-selling mortgage-backed securities “has created uncertainty, uncertainty that affects the market’s view of Deutsche Bank as an investment, uncertainty that affected some clients’ views of Deutsche Bank as a counterparty, and uncertainty that even affects our financial planning and strategy execution.”

The more challenging outlook has forced the bank to adjust its financial planning and has negatively impacted its liquidity reserves and prime brokerage business as many hedge funds in particular have switched allegiances. Cryan acknowledged, “We do see a diminution in revenues across many of our businesses…. we know that when our name is in the headlines for the wrong reasons, the phone doesn’t ring as frequently.”

Earlier this month in a letter to Deutsche Bank employees, Cryan had warned that conditions “will stay difficult for a while,” said he was working to finalize the settlement ASAP. He plans to intensify the major restructuring already underway. While that honesty satisfied many, a major shareholder told Cryan to make more cuts from its bond trading desks: “Fixed income is still oversized in terms of cost and on group level there are still 10,000 staff too many.” A Fairesearch Alphavalue analyst said that Deutsche Bank should shutter its investment banking division altogether. That is unlikely, and Cryan did assure analysts that issues such as liquidity had recently stabilized and its capital position had improved.

Separately, Nomura reported turning a profit for a second-straight quarter. This time last year, the Japanese bank posted a loss of $438m in 3Q 2015, which led to a significant restructuring that included 900 job cuts across Europe and the Americas. Reduced costs from those redundancies taken together with increased revenue from fixed-income trading led the bank back to profitability. But will Nomura be hiring front-office investment bankers anytime soon? That’s still to be determined, but if so, it likely won’t be until next year, and it will probably be at a cautious pace.

Picture Credit: DB’s Cryan – Time to pray…

Atlantic Charges that Big Business is Killing Innovation

Picture Credit: The Atlantic, October 2016

It’s interesting to see The Atlantic criticize big business for failing to innovate. The article cites low new business formation and the lack of dynamism in the U.S. economy as key symptoms for our economic stagnation.

Botanists define a rheophyte as an aquatic plant that thrives in swift-moving water. Coming from the Greek word rhéos, meaning a flow or stream, the term describes plants with wide roots and flexible stalks, well adapted to strong currents rather than a pond’s or pasture’s stillness. For most of the 20th century, U.S. lawmakers worked to maintain just these sorts of conditions for the U.S. economy—a dynamic system, briskly flowing, that forced firms to adapt to the unpredictable currents of the free market or be washed away. In the past few decades, however, the economy has come to resemble something more like a stagnant pool. Entrepreneurship, as measured by the rate of new-business formation, has declined in each decade since the 1970s, and adults under 35 (a k a Millennials) are on track to be the least entrepreneurial generation on record. This decline in dynamism has coincided with the rise of extraordinarily large and profitable firms that look discomfortingly like the monopolies and oligopolies of the 19th century.

In fact, investment bankers have been busy inking deals to merge big firms together without any fear of regulatory intervention. And highly valued internet firms like Google and Amazon such up AI players and other social media firms with barely a stop at their stock share printing press. Derek Thomson argues that,”antitrust law shifted over the course of the 20th century from principally protecting competition to principally protecting consumers. Today many reformers are calling for the pendulum to swing back.”

Frankly, the disturbing stories of corruption and deceit at big banks makes one wonder why the Federal Reserve continues to pile on the national debt to nearly $20 Trillion. Look at the CEO of Deutsche Bank featured in a Zero Hedge article which has benefited from the largess of the European Central Bank.

Picture Credit: Deutsche Bank’s CEO John Cryan praying

Zero Hedge points out the extensive market manipulation behind the story, “Following the seemingly endless procession of short-squeeze-fueling trial balloons last week – from settlement rumors to German blue-chip bailouts to Qatari investors – Germany’s Bild newspaper confirms the rumors that sparked weakness on Friday: Deutsche bank CEO John Cryan has failed to reach an agreement with the US Justice Department. His arsenal of strawmen include: denials of bailouts, blaming speculators, rumors of informal capital raising talks with Wall Street firms, rumors of capital injections from Germany’s blue-chip corporations, rumors (denied) of Qatari sovereign wealth fund investments, and the sale of key assets and elimination of thousands of jobs.

The Atlantic laments there is an issue with Bigness overall.

The technology sector presents a thorny problem for antitrust reformers. Between too-big-to-fail banks and seemingly incompetent cable companies, there may be popular support for action against consolidated market power. But many of the companies in Warren’s crosshairs are beloved. The three most admired American companies are Apple, Alphabet, and Amazon, according to Fortune; Facebook is in the top 15 and rising fast. Our attention seems to be ever more focused on our phones, and Apple owns 40 percent of the U.S. smartphone market; between them, Google and Facebook collect more than half of all mobile-display advertising revenues. If mobile phones, software, and social networks eat the world, who decides how big the portions can be?