Already at the start of 2016 Deutsche Bank’s share price declined on concerns about deflation/negative long-term rates, as well as the prospect of mega fines. After years of struggling with the consequences of the “big financial crisis,” the financial entity has once again become too dependent on poorer quality capital, without ever complying on the operational front, putting itself at the mercy in fact of the same markets which supposedly were their daily bread. Deutsche Bank is currently trading at a 30% book value 2018. This is a negative record for the German Bank and for the sector, and causes havoc with Alphavalue’s valuation models.
The sudden finding last week that its operations in the US would need to be cut back as the Federal Deposit Insurance Corporation was worried about the bank’s local funds is disastrous news. After last month’s correction, there is not much left in terms of downside potential (-3%). But this does not allow for a recapitulation of some kind, which is an increasingly more likely result given that the 14.8% Tier is hiding the magnitude of the disaster in the US. Shareholders should expect to be sent to the “cleaners” once more.
According to Bloomberg, Deutsche Bank Chairman Paul Achleitner has consulted the bank’s major shareholders about a possible merger with rival Commerzbank in the face of difficulties in moving its restructuring plan forward.
The news agency notes that currently there are no talks between both German banks and any possible movement in that direction would not be imminent. However, they add that Achleitner is testing the interested parties on possible agreement in the future.