How Deutsche Bank’s £35 trillion of trades puts Europe in peril
The boss of crisis-hit Deutsche Bank has warned staff of further pain after profits crashed amid mounting concern for Europe’s beleaguered financial sector.
Profit at Europe’s biggest lender plunged 67pc to £341.5m in the second quarter of 2016, while revenues dropped 20pc to £6.2bn.
After tax, profits were down 98pc to £16.7m. It prompted a further sell-off of shares by nervous investors at the lender, which has seen its value fall by 58.5pc, or nearly £20bn, in the last 12 months.
The International Monetary Fund has warned that Deutsche was so closely entwined with other big banks, its failure could bring the global system crashing down.
And a US arm of Deutsche Bank failed a Federal Reserve stress test for the second year running, due to balance sheet weaknesses.
The lender has a derivatives portfolio of £35trillion – more than half the size of the global economy – which some analysts fear is a ticking time bomb.
Deutsche brought in Yorkshireman John Cryan last July to turn things around, and he has since announced 35,000 jobs will be cut.
But the chief executive yesterday told staff: ‘If this weak economic environment persists, we will need to be still more ambitious in our restructuring.
‘We will do everything in our power to accelerate the measures we have already planned.
‘We recognise that we are asking a lot of you and that this will continue for the foreseeable future.’ Cryan stressed the bank was fundamentally strong and said doubts over its future were unjustified.
Yesterday’s results throw a spotlight on the Continent’s troubled financial system as investors nervously await results of a European Banking Authority stress test.
The report, due out tomorrow, is likely to deliver a damning verdict on Monte dei Paschi di Siena – Italy’s oldest bank.
The country’s lenders are buckling under the strain of a £307bn pile of bad debt.
Last-ditch efforts are now under way to save Monte dei Paschi with a private rescue fund. In Italy, many ordinary savers own bank bonds and Prime Minister Matteo Renzi is desperate to prevent them from taking a hit. He fears alienating the public ahead of a referendum on political reform in autumn, and is likely to resign if he loses the vote.
German Chancellor Angela Merkel has refused to show flexibility on a rescue. However, there is little doubt that Germany would step in to save the bank if necessary – regardless of EU law.
DB is the new lehman brothers..it has the global financial world shaking in its boots over its dodgy bets..
“The lender has a derivatives portfolio of £35trillion – more than half the size of the global economy – which some analysts fear is a ticking time bomb.”
tick tick tick..