Deutsche Bank’s New Old Losses: When a Candy Bites Back

This is a syndicated repost courtesy of True Economics. To view original, click here. Reposted with permission.

Our good old friends at @DeutscheBankAG have been at it again… this time (h/t to @macromon) raking in $1.6 billion of freshly announced losses from pre-Global Financial Crisis trades in municipal bonds. Story at WSJ: https://www.wsj.com/articles/deutsche-bank-lost-1-6-billion-on-a-bond-bet-11550691086 (gated)

Liquidity moves markets!

Follow the money. Find the profits! 

In summary: “This transaction was unwound in 2016 as part of the closure of our Non-Core Operations”, according to the spokeswoman email to the WSJ. DB ca $7.8 billion portfolio of 500 municipal bonds back in 2007. The bonds were insured by specialised mono-line insurers to protect against default. In March of 2008, the bank followed up the trade by buying additional default protection from Berkshire Hathaway for $140 million. Insure-and-forget, right?By the end of 2011, the bank had a little over $115 million of reserves set aside to cover potential losses on the trade. That figure rose to over $1 billion at the start of 2016. By May 2016, the bank calculated an additional loss of $728-$768 million on a potential sale of the portfolio net of the loss protection from Berkshire.

Per WSJ, this loss – previously unreported – amounts to ca x4 times DB’s 2018 profits.

The champs!

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Don't want to subscribe? Support the Wall Street Examiner and get 1 or more Lee Adler's Liquidity Trader reports each month. Click the button below to see your options.

Become a Patron!