2008-08-25 Robin Hooded:

Deutsche Bank has been forced to cough up cash to repurchase some of its own junk, specifically auction rate securities. Deutsche got hit with a $15M fine and must buy back of about $1B in auction rate notes. <>

2008-08-02 Q2 Stumbling Block:

Deutsche Bank somehow had positive earnings in the second quarter, but the bank still managed to unveil $3.6B in write-downs and $133.86B of Level 3 assets. The bank was also able to increase loan loss provisions to $210.1M, up from $126.1M a year earlier.

Here’s the tally thus far:

1. Tally for Write-Downs/Charge-Offs: $18.6B + $2.3B = $20.9B
   
2. Tally for cash raised: $0.0
3. Current level of Level III assets at $133.86B
4. Current level of loan loss reserves at $387.57M
   

We now sum all the distresses to get Deutsche Bank’s current Misery Index of $155.15B <>

2008-05-22 Write Downs Count of a Different Sort:

We have been keeping a running tally of write downs and other credit related distress taken by the major banks since 2007. But here come a write down count of a different sort, how much in writedowns and credit losses firms have written off per wholesale banking employee.

Deutsche Bank - $7.6bn, 20,000, $380,000 per employee

2008-05-19 - Off Balance:

Banks are not writing down their write-downs and getting away with it. Instead they are writing them down in the balance sheet and there is a distinction.

Deutsche Bank was hiding $7B on the balance sheet, but we will correct things for them by adding $7B to their existing $11.3B total. New sum = $18.3B.

2008-04-28 - No where to Run … or Hide:

Deutsche Bank’s twenty-quarter win streak came to an end as the global credit bubble disaster finally caught up. With their market values in free fall Deutsche Bank was forced to account for the values of mortgage - backed securities and loans for leveraged buyouts. That accounting brought a $487.7 million hit to the bottom line on write downs of $4.2 billion, half of all of 2007 write down total.

2008-04-28 - No where to Hide:

Deutsche Bank reaffirmed that it would that it expected to write down $3.9 billion related to the U.S. subprime collapse. The bank alos intends a rights issue.

2008-04-01:

Deutsche Bank announced that it would more than double up its writedown total. Tuesday the bank said it expected to write down $3.9 billion due to market conditions triggered by the U.S. subprime collapse.

“Conditions have become significantly more challenging during the last few weeks,” the bank said. “Reflecting this environment, Deutsche Bank anticipates in the first quarter 2008 markdowns in the region of €2.5 billion, related to leveraged loans and loan commitments, commercial real estate and residential mortgage-backed securities.”

In so doing another discontented CEO via words and deeds comes more into line with the reality of the subprime crash and its consequences, as chief executive Josef Ackermann, acknowledged concrete losses for the first time. The acknowledgement brings Deutsche Bank’s writedown tally to $7.1 billion.

We still have no specific information on where these writedowns originate from. Could it be the MortgageIT toxic waste dump? In that case, this may be only the beginning. But even the full announcement may not make this clear.
2008-02-09:

In Macklowe seen in default, no foreclosure yet we witness yet more un-highlighted downside risk Deutsche Bank faces:

Talks between New York real estate titan Harry Macklowe and lenders on Manhattan office buildings he bought last year broke for the day without resolution, a person briefed on the matter said on Friday.

The lack of agreement with the lenders technically could put Macklowe in default, the source said, adding that none of the lenders are currently pushing for foreclosure on the buildings.

…

Macklowe reportedly borrowed $5.8 billion in February 2007 from Deutsche Bank AG to buy seven Manhattan office buildings formerly owned by Equity Office Properties.

Last week, Macklowe, reportedly reached a tentative deal with Deutsche Bank to turn over the buildings, which he bought for $7 billion. Deutsche Bank declined to comment on the matter.

Macklowe reportedly owes Deutsche Bank $5.8 billion in acquisition financing that is known as “non-recourse” — which would allow Deutsche to take control of the buildings, but do not give it a claim to the rest of Macklowe’s empire.

Ruh-roh. On the hook for $5.8B, non-recourse?

Not a manifest risk, you say? Ok kids, raise your hands if you think the price risk on those Manhattan office buildings, now post-credit crunch, is to the upside instead rather than the downside?

That’s what we thought. Let’s be generous and assume the valuations take only a 10% hit. That means Deutsche Bank would be out a cool half-billion. That kind of money starts to add up. Or subtract, as it were.

If the notes are renegotiated, of course, Deutsche Bank will still be out the equivalent value, as it is the carrying cost relative to market value and conditions that is sinking Macklowe. So either principal or interest or both will have to take a haircut.

Sorry Deutsche Bank, you’ve been punked (and by Sam Zell and Blackstone, no less). Welcome to the “bagholder club”.

We wonder how much of the rest of DB’s asset-side loan book could be considered this kind of “top-buying”. Things that make you go “hmmm….”

First Writeup, 2008-02-07:

Deutsche Bank just reported its full 2007 results, reporting a total of about $3.2B in write-downs between the third and fourth quarters (all but about $73M worth / 50M euros in the third), and it even managed to turn a small profit amidst the credit market calamity. And wouldn’t you know it, the bank didn’t have a lick of losses due to the subprime breakdown!

They thus predict a pre-tax profit of about $12.3B equivalent for the present year.

Excuse us if we don’t quite believe the subprime bit … or the rosy forecast.

You see, back in 2006, Deutsche Bank bought a little lending outfit called MortgageIT — a transaction that was consummated in January 2007 (quite late in the housing finance collapse game). While the market was definitely tanking prior to that point (visible on MortgageIT’s Q-3 ‘06 results), Deutsche Bank plowed forward with the acquisition anyway. It paid a little over $400M for the company. It was quite a boon to MortgageIT’s founders, who had just gone public a few years before.

MortgageIT had just got into securitization and something called “CDOs” big time in 2005. They also decided to start retaining a significant chunk of their portfolio. Most of their business consisted of Subprime, Alt-A, Pay Option ARMs, and Jumbo loans.

Well, at least they didn’t get into HELOCs and second lien purchase loans (which are more often than not close to worthless these days).

At any rate, from the last data we saw, MortgageIT had about $4B in its held portfolio, about $4B of loans being held-for-sale, and about $4B of outstanding warehouse lines (late 2006 data).

That’s about $12B of potential exposure backed by some very weak collateral. We wonder how much of that exposure lingers today, buried in the bowels of DB’s balance sheet.

If you know anything, please contact us. DeutscheBank also appears to have some very large gross derivatives positions (in excess of $40T). Now that the reliability of counterparties is coming in to question, some of those net hedges may not match up anymore. Again, if you know anything, contact us.