Ballooning Bank Risk...
Barclays and Deutsche Bank cost to protect against losses... using Credit Default swaps... has risen 2.5x in the last few days. 3/4 of EU bonds... are yielding NEGATIVE rates... Japan went negative yesterday...
http://www.bloomberg.com/news/articles/2016-02-08/deutsche-bank-says-it-has-at1-payment-capacity-of-1-1-billion
February 8, 2016 — 12:04 PM MST Updated on February 9, 2016 — 1:07 AM MST
Deutsche Bank Says It Has the Cash for Riskiest Debt Payouts
Michael J Moore
MooreMichaelJ
Nicholas Comfort Edward Robinson
Shares slide on doubts about bank's ability to make payments
Lender is due to pay about 350 million euros in April
Deutsche Bank AG became the largest lender in at least four years to feel compelled to reassure investors and employees that it has enough cash to pay its debts.
Germany’s biggest bank said in a statement Monday that it has more-than-sufficient means to pay coupons on its riskiest debt both this year and in 2017. Deutsche Bank also published a note to employees from Chief Financial Officer Marcus Schenck that said the firm’s “capital and risk position remains strong.â€
The cost of protecting Deutsche Bank’s debt against default has more than doubled this year, while its stock trades at about one-third of the company’s liquidation value. Co-Chief Executive Officer John Cryan has failed to generate confidence in his plan to cut costs and build capital as volatile markets threaten revenue and outstanding regulatory probes raise the specter of continued legal charges.
The shares jumped 2.9 percent to 14.22 euros at 9:05 a.m. in Frankfurt. They have declined about 37 percent this year.
Deutsche Bank and European rivals including Credit Suisse Group AG and Barclays Plc are getting walloped by a global market rout just as they embark on ambitious overhauls of their securities units. The selloff, as investors seek safety from China’s slowdown and falling oil prices, is complicating that task by reducing revenue from investment banking and making parts of the business more expensive to exit, hampering efforts to ultimately plow more earnings into capital.
‘Bad Year’
January marked the worst start to a year for underwriting bonds in Western Europe since 2008, while high-yield bond fees slumped 78 percent from last year, data compiled by Freeman & Co. show. Stock sales in Europe, the Middle East and Africa dropped 60 percent so far this year, data compiled by Bloomberg show. Shares of the three investment banks have tumbled at least 25 percent since that month began, putting them in the bottom half of the 39-company Bloomberg Europe Banks and Financial Services Index.
“It’s going to be a really bad year,†said Lutz Roehmeyer, who helps manage about 11 billion euros ($12.3 billion) at LBB Invest in Berlin, which holds shares of lenders including Deutsche Bank. European banks “can essentially scrap any goals they had set themselves for this year.â€
Riskiest Debt
Deutsche Bank said Monday that it still has room to pay about 1 billion euros in 2016, enough to cover about 350 million euros in Additional Tier 1 coupons due in April. The estimated payment capacity for 2017 is about 4.3 billion euros, boosted in part by proceeds from the announced sale of a stake in Huaxia Bank Co., the Frankfurt-based lender said. The 2017 estimate is before any effect from 2016 profit or losses.
The statement did little to reverse a selloff in credit markets. The cost to protect against losses on the bank’s riskiest debt continued to climb, reaching the highest level since the height of the European debt crisis in 2011, according to data compiled by Bloomberg.
The cost of protecting Deutsche Bank’s subordinated debt rose for an eighth day. Credit-default swaps increased 13 basis points to 452 basis points, the highest since November 2011, according to data compiled by Bloomberg.
ayment Concerns
The statement came after Simon Adamson, an analyst at CreditSights Inc., signaled concern about the bank’s ability to pay coupons in 2017 if operating results disappoint or litigation costs are higher than expected. A loss in 2015, driven by legal costs and writedowns of goodwill, and declining revenue from the firm’s biggest business in the fourth quarter narrowed the room for error.
Dividend Plans
Doubts about Deutsche Bank’s ability to pay coupons on Additional Tier 1 debt fueled a selloff in the bank’s bonds and shares this year, with the stock losing about 39 percent of its value. The contingent convertible bonds -- also known as CoCos -- have turned in a similar performance as the cost of protecting the company’s subordinated debt from default for five years using credit-default swaps more than doubled since the end of 2015.
Deutsche Bank’s core long-term returns will be affected either by significant balance-sheet deleveraging or by raising capital, Berenberg analysts wrote in a note to clients Monday.
Cryan has scrapped the dividend for 2015 and 2016 and said the firm doesn’t need to raise additional capital. Credit Suisse, also under pressure to strengthen its balance sheet, tapped investors for 6 billion Swiss francs ($6.1 billion) to bolster capital last year.
U.S. lenders including Bank of America Corp. and Morgan Stanley took steps in 2011 to reassure investors amid market volatility tied to the European sovereign-debt crisis. Bank of America announced a $5 billion investment from Warren Buffett to shore up capital in August of that year, while Mitsubishi UFJ Financial Group Inc. issued a statement in October reiterating its alliance with Morgan Stanley.
Barclays and Deutsche Bank cost to protect against losses... using Credit Default swaps... has risen 2.5x in the last few days. 3/4 of EU bonds... are yielding NEGATIVE rates... Japan went negative yesterday...
http://www.bloomberg.com/news/articles/2016-02-08/deutsche-bank-says-it-has-at1-payment-capacity-of-1-1-billion
February 8, 2016 — 12:04 PM MST Updated on February 9, 2016 — 1:07 AM MST
Deutsche Bank Says It Has the Cash for Riskiest Debt Payouts
Michael J Moore
MooreMichaelJ
Nicholas Comfort Edward Robinson
Shares slide on doubts about bank's ability to make payments
Lender is due to pay about 350 million euros in April
Deutsche Bank AG became the largest lender in at least four years to feel compelled to reassure investors and employees that it has enough cash to pay its debts.
Germany’s biggest bank said in a statement Monday that it has more-than-sufficient means to pay coupons on its riskiest debt both this year and in 2017. Deutsche Bank also published a note to employees from Chief Financial Officer Marcus Schenck that said the firm’s “capital and risk position remains strong.â€
The cost of protecting Deutsche Bank’s debt against default has more than doubled this year, while its stock trades at about one-third of the company’s liquidation value. Co-Chief Executive Officer John Cryan has failed to generate confidence in his plan to cut costs and build capital as volatile markets threaten revenue and outstanding regulatory probes raise the specter of continued legal charges.
The shares jumped 2.9 percent to 14.22 euros at 9:05 a.m. in Frankfurt. They have declined about 37 percent this year.
Deutsche Bank and European rivals including Credit Suisse Group AG and Barclays Plc are getting walloped by a global market rout just as they embark on ambitious overhauls of their securities units. The selloff, as investors seek safety from China’s slowdown and falling oil prices, is complicating that task by reducing revenue from investment banking and making parts of the business more expensive to exit, hampering efforts to ultimately plow more earnings into capital.
‘Bad Year’
January marked the worst start to a year for underwriting bonds in Western Europe since 2008, while high-yield bond fees slumped 78 percent from last year, data compiled by Freeman & Co. show. Stock sales in Europe, the Middle East and Africa dropped 60 percent so far this year, data compiled by Bloomberg show. Shares of the three investment banks have tumbled at least 25 percent since that month began, putting them in the bottom half of the 39-company Bloomberg Europe Banks and Financial Services Index.
“It’s going to be a really bad year,†said Lutz Roehmeyer, who helps manage about 11 billion euros ($12.3 billion) at LBB Invest in Berlin, which holds shares of lenders including Deutsche Bank. European banks “can essentially scrap any goals they had set themselves for this year.â€
Riskiest Debt
Deutsche Bank said Monday that it still has room to pay about 1 billion euros in 2016, enough to cover about 350 million euros in Additional Tier 1 coupons due in April. The estimated payment capacity for 2017 is about 4.3 billion euros, boosted in part by proceeds from the announced sale of a stake in Huaxia Bank Co., the Frankfurt-based lender said. The 2017 estimate is before any effect from 2016 profit or losses.
The statement did little to reverse a selloff in credit markets. The cost to protect against losses on the bank’s riskiest debt continued to climb, reaching the highest level since the height of the European debt crisis in 2011, according to data compiled by Bloomberg.
The cost of protecting Deutsche Bank’s subordinated debt rose for an eighth day. Credit-default swaps increased 13 basis points to 452 basis points, the highest since November 2011, according to data compiled by Bloomberg.
ayment Concerns
The statement came after Simon Adamson, an analyst at CreditSights Inc., signaled concern about the bank’s ability to pay coupons in 2017 if operating results disappoint or litigation costs are higher than expected. A loss in 2015, driven by legal costs and writedowns of goodwill, and declining revenue from the firm’s biggest business in the fourth quarter narrowed the room for error.
Dividend Plans
Doubts about Deutsche Bank’s ability to pay coupons on Additional Tier 1 debt fueled a selloff in the bank’s bonds and shares this year, with the stock losing about 39 percent of its value. The contingent convertible bonds -- also known as CoCos -- have turned in a similar performance as the cost of protecting the company’s subordinated debt from default for five years using credit-default swaps more than doubled since the end of 2015.
Deutsche Bank’s core long-term returns will be affected either by significant balance-sheet deleveraging or by raising capital, Berenberg analysts wrote in a note to clients Monday.
Cryan has scrapped the dividend for 2015 and 2016 and said the firm doesn’t need to raise additional capital. Credit Suisse, also under pressure to strengthen its balance sheet, tapped investors for 6 billion Swiss francs ($6.1 billion) to bolster capital last year.
U.S. lenders including Bank of America Corp. and Morgan Stanley took steps in 2011 to reassure investors amid market volatility tied to the European sovereign-debt crisis. Bank of America announced a $5 billion investment from Warren Buffett to shore up capital in August of that year, while Mitsubishi UFJ Financial Group Inc. issued a statement in October reiterating its alliance with Morgan Stanley.
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