Deutsche Bank Smolders
February 9, 2009 – 2:31 pm
Germany was at war the last time Deutsche Bank absorbed a full-year loss, and that loss was the last in the lifetimes of most of its investors. Since the summer of 2007, the banks frantic paper efforts have kept it ahead of the relentlessly expanding shock wave of the credit burst. These attempts have come in many forms: accounting shenanigans, reclassifying €25B of level 3 assets, and direct governmental intervention to forbid investors from naked short selling the bank’s stock.
But paper tigers roar no more and Deutsche Bank is burning where it stands, writing down more in fiscal fourth quarter 2008, than it did in all of fiscal 2007.
For the full year 2008, Deutsche Bank revised the total value of its assets lower by 7.0 billion euros, more than three times the 2007 write-downs of 2.3 billion euros.
In the fourth quarter alone, asset write-downs amounted to 5.3 billion euros.
Thus far, the bank has not raised any cash and has no plans to do so. Chairman Josef Ackermann says the bank does not need and will not seek government assistance.
While other major German banks have benefited from a government rescue plan for the sector, Ackermann told a press conference: “We want Deutsche (Bank) to succeed in pulling out of this crisis by itself.”
Ackermann added that he saw no “dramatic” risks in the bank’s accounts
For now it looks like Deutsche Bank won’t take a freebie, but we have heard this boastful ploy before. The best course of action is to simply wait and see, but by taking credit loss provisions of €1.1B, the bank is screaming that its best days lie behind it.
It also took provisions for credit losses worth a total 1.1 billion euros, an increase of 76 percent from the previous year.
That 76 percent increase shows just how fast the bubble vacuumed up the bank. It had been more than 60 years since Deutsche Bank lost a single cent. After Deutsche Bank posted a record profit of €6.5B in 2007, it took less than a year to lose €6.5B. Unbeknownst to the common people, Ponzi finance lies at the heart of the banking industry, but for Chairman Josef Ackermann, the lies continue reflexively. Witness:
In a statement earlier, he said “operating conditions in the (fourth) quarter were completely unprecedented and exposed some weaknesses in our business model.
The only model keeping the bank profitable for the past two quarters has been the above-mentioned government-sanctioned accounting fraud and governmental short selling intervention. Not even this could make Deutsche Bank profitable in fiscal 2008.
“We are certain that Deutsche Bank is going to come out of this crisis all the stronger,” he added.
We are not so confident that the bank will come out of this at all. Traders on the floor seemed to agree with us as they crushed the stock following Ackermann’s deliberate vagueness. It was only the commitment to the dividend that rescued the shares, inspired confidence and payed off the share-heavy insiders as well. That’s an ancillary morsel no one wants to mention. While the bank cut 12,000 jobs and slashed compensation and costs where it could, that dividend still remained sacrosanct.
Then Ackermann acknowledged that he would forego his 2008 bonus. Given that the bank posted a loss, one has to wonder just how much he could be forfeiting. Being a real straight shooter, he swears he believes in investment banking. By the way, that’s the same banking model that ushered in the first of many losses since the war.
Ackermann said he remained committed to the bank’s business model, which is focused on investment banking, a once lucrative field in which Deutsche Bank is one of the global leaders.
That makes no sense. Investment banking is dead. If you don’t believe it, just ask chairman Ackermann.
Confirming he is to step down at next year’s annual meeting, Ackermann admitted to being “very disappointed” at the results and refused to give any guidance for 2009, despite insisting the bank had performed well in January.
The implosion of Germany’s biggest bank is immenent. Chairman Ackermann said it the second he jumped ship. With both feet planted firmly in concrete, Deutsche Bank is now bracing for a very bad and nasty future. The insiders, as always, sold out at the pinnacle of the credit bubble. While all king’s men do everything that will make matters worse, Deutsche Bank is burning through its reserves and smoldering in the ashes of Ponzi finance.
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