Two news regarding Deutche Bank

hello,

Recently, the market much space is devoted to Deutsche Bank. And all because of two interesting facts that have arisen. The first news comes from the financial statements for 2013.

News number 1

Deutsche Bank's $75 Trillion in derivatives is 20 times greater than German GDP. This means that in case of danger fall of DB, Germany alone would not be able to save the Bank. €54,652,083,000,000 which, converted into USD at the current exchange rate, amounts to $75,718,274,913,180. Which is over $5 trillion more than JPM's total derivative holdings.

DB would proceed to undergo a massive balance sheet deleveraging campaign over the next year, in which it would quietly dispose of all the ugly stuff on its balance sheet during the relentless Fed and BOJ-inspired "dash for trash" rally in a way not to spook investors about everything else that may be beneath the Deutsche covers.

Deutsche Bank did the same again when it announced that it would issue yet another €1.5 billion in Tier 1 capital, a year ago.

"The issuance will be the third step in a co-ordinated series of measures, announced on 29 April 2013, to further strengthen the Bank’s capital structure and follows a EUR 3 billion equity capital raise in April 2013 and the issuance of USD 1.5 billion CRD4 compliant Tier 2 securities in May 2013. Today’s announced transaction is the first step towards reaching the overall targeted volume of approximately EUR 5 billion of CRD4 compliant Additional Tier 1 capital which the Bank plans to issue by the end of 2015"

€504.6 billion in positive market value exposure (assets), and €483.4 billion in negative market value exposure (liabilities), both of which are the single largest asset and liability line item in the firm's €1.6 trillion balance sheet mind you (and down from €2 trillion a year ago: a 20% deleveraging which according to DB "was predominantly driven by interest-rate derivatives and shifts in U.S. dollar, euro and pound sterling yield curves during the year, foreign exchange rate movements as well as trade restructuring to reduce mark-to-market, improved netting and increased clearing"), and subsequently collapses even further into a "tidy little package" number of just €21.2 in derivative "assets."

The conclusion of this story has not changed one bit from last year: this epic derivative exposure is the primary reason why Germany, theatrically kicking and screaming for the past five years, has done everything in its power, even "yielding" to the ECB, to make sure there is no domino-like collapse of European banks, which would most certainly precipitate just the kind of collateral chain breakage and net-to-gross conversion.

I encourage you to draw your own conclusions.

chart 1. DB's financial statement of 2013

News number 2

Deutsche Bank officially resigns London Fix seat

WSJ confirms:

- Deutsche Bank said to be UNABLE TO FIND BUYER FOR GOLD SEAT;

- DEUTSCHE BANK RESIGNS SEAT ON GOLD, SILVER FIX, GIVES TWO WEEKS NOTICE - SOURCE.

This is hardly surprising given previous comments that possible manipulation of precious metals "is worse than the Libor-rigging scandal." but it does leave us wondering who is left to do the manipulating? It seems no one wants to be part of the fixing process (critical for so many derivatives contracts) unless they are allowed to manipulate it to their own needs.

As a reminder, Deutsche is one of five banks involved in the twice-daily gold fix for global price setting.

As Bloomberg reports,

“Deutsche Bank is resigning its position on the gold and silver benchmark setting process,” it says in e-mailed statement today."

"It wouldn't surprise me if the other banks were looking at pulling out as well. Why would they want the aggravation?" said the source, who declined to be named."

"The more worrying point is that, if you don't have the fixing, what do you have? There's a lot of contractual business done on the gold fix, and if you've got no basis for where the price is, someone is going to lose out."

regards,

oscarjp