Every time a major bank runs into trouble it brings back memories of the last stock market crash. Deutsche Bank certainly is in some trouble but not yet to the extent of bring down markets in the general sense. Neil Wilson’s comments below neatly sum up the problem. It is not time to panic yet but this situation does warrant watching closely.
As you can see from the Bloomberg graph below the shares have gone from around $80 in 2007 to around $12 currently which was the bottom of the market in the last market crash in 2008/2009. Today the shares are holding up without further deterioration.
Neil Wilson, a markets analyst at London-based spreadbetter ETX Capital highlighted the bank has been under pressure from aggressive short-selling, notably from some large hedge funds. This includes Soros Fund Management, the family office run by George Soros, which has built up a short position, according to a regulatory filing earlier this year.
“It’s not a Lehmans moment in the offing. Banks are generally better capitalized and able to cope with adverse shocks. And Deutsche’s derivatives exposure can be overstated,” Wilson said in a note Wednesday.
“Deutsche’s problem is not capitalization – it’s just that its costs have soared (mainly through litigation and fines) and it’s not that profitable any more.” (CNBC)