Deutsche Bank, the European Union’s largest bank, has suffered a 90% stock price decline since its peak on May 11, 2007. The European Central Bank (ECB) rode to the rescue like John Wayne in a John Ford US Cavalry flick.
This chart allows you to see the attempt of the ECB to stimulate growth in the European economy and save the banks. After Deutsche Bank’s stock price peaked in May 2007, it began to nosedive. The financial crisis set it and the ECB reacted with lowering rates and performing asset purchases (like the Federal Reserve). While the ECB began to trim their asset purchases in 2013, they had to start up asset purchases again and cut the main refinancing rate once again in late 2014.
Here is Deutsche Bank’s credit default spread post financial crisis.
Deutsche Banks remains stranded on the rocks after the EU’s economic and financial Jutland (the largest naval battle of World War I, damaging both the British and German naval fleets).
Deutsche Bank has a tier 1 capital ratio of about 14%, down from about 17% in 2013.
Deutsche Bank’s Earnings Per Share (EPS) resembles a German Stuka (Junkers Ju-87) dive bomber from World War II.
Of course, Europe has sub-2% GDP growth (except for the UK) with almost nonexistent inflation. Italy is the next Greece, so you should watch them closely (sub-1% GDP growth and a touch of deflation).
As I have said before, the EU banks have never recovered from the global credit bubble of the 2000s.
So, the EU remains on the economic rocks and their banks pose a threat to the global financial community. The credit bubble was Jutland 1 and now the stagnation of the EU economy is Jutland II.
When pundits begin yammering about how Brexit is causing Treasury yields and mortgage rates to decline, show them the nosedive in EU banking stocks and the EU’s economic stagnation that will result in continued Central Bank intervention. NOT necessarily the Brexit.
German Junker Ju-87 (Stuka) fighters in a dive-bombing run.
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