Deutsche Bank has $1.5 trillion of declared asset value on top of $67 billion of net worth. But a large portion of its assets are loans and related financing vehicles and trading positions connected to Glencore, VW, the energy sector, emerging market companies, high yield and a highly unreliably valued net derivatives position. It Deutsche Bank has ‘mismarked’ the value of all these assets by just 5% its net worth is wiped out.
It’s more likely that the bulk of its assets are overvalued by at least 20-30%. And that’s in the context of the current financial and economic environment – both of which seem to be quickly deteriorating. In other words, DB is technically insolvent. I performed a similar analysis on some big bank balance sheets in late 2007/early 2008 and my model predicted the collapse of Countrywide, Wash Mutual and Wachovia. All of the big Wall Street banks should have collapsed but we know how that ended.
This post was published at Investment Research Dynamics on October 9, 2015.
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