Europe's Largest Bank Deutsche Shrinks Workforce by 35,000
The Elephant in the Room ?
As the mainsteam press such as Wall Street Journal would have you believe.....
FRANKFURT— Deutsche Bank AG on Thursday said it would eliminate thousands of jobs and shut operations in several countries, the latest European bank taking sweeping action to arrest declining profits.
The biggest lender in Europe’s most powerful economy will cut 35,000 jobs from its payroll and make a raft of other changes to fix a bank its new co-Chief Executive John Cryan described as saddled with broken technology and “poor historic behavior.”
Like other European banks, Deutsche Bank is facing headwinds on several fronts, as profitability is hit by tougher regulations and capital requirements, volatile market conditions and stiffer competition from global rivals, particularly U.S. banks.
The lender posted a €6B ($6.6B) net loss for the third quarter, scrapped its dividend for the next two years and announced plans to exit 10 countries and reduce its workforce.
But to put DB in a clearer perspective...I have been writing about Deutsche bank for over 5 years now, not because I have any particular negative sentiment to the institution; rather I look at banks balance sheets to spot black swans. There are more black swans in Deutsche bank's closet than you could possibly count.
Let me make this clear - they are running the balance sheet of the bank at such an extreme leverage that any falls in real valuation of its asset side of its balance sheet literally wipes out their working capital (ie. insolvency). Hence the suspension of "mark-to-market" accounting.
How exposed is Deutsche Bank?
The trouble for Deutsche Bank is that it’s conventional retail banking operations are not a significant profit center. To maintain margins, Deutsche Bank has been forced into riskier asset classes than it’s peers.
Deutsche Bank is sitting on more than Euro 50 Trillion in derivatives bets — an amount that is twenty times greater than German GDP. Their derivatives exposure dwarfs even JP Morgan’s exposure – by a staggering $5 trillion.
With that kind of exposure, relatively small moves can precipitate catastrophic losses. Again, we must note that any defaults from the likes of Greece, Portugal, Spain or Italy just to name but a few would instigate a banking crisis of unprecendented proportions.
We are facing a world debt crisis and the first dominos very much look like they are squarely in Europe.
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