The analogy to Lehman Brothers strengthened overnight (09.28.2016) as Deutsche Bank CEO John Cryan sounded the all clear for the bank in an interview with Germany’s Bild magazine.
So everything must be fine, right?
For those who might be inclined to take Cryan at his word, consider that we’ve seen this exact scenario play out before. In 2008, Lehman Brothers CEO Dick Fuld incredulously bellowed that the bank was fully capitalized and that he would punish the shorts who were betting against the stock. Soon after, Lehman was no more.
But what could we expect Cryan to say?
Earlier this year Deutsche Bank admitted to rigging prices in the precious metals markets. They’ve fired thousands of staff and have seen major changes in the CEO suite. Let’s avoid a lengthy play by play and skip ahead to the here and now. First Deutsche Bank raised eyebrows by not being able to deliver physical gold despite their contractual obligation to do so. Then the US Department of Justice tossed out a $14Bn number as a penalty for Deutsche Bank’s shady – and entirely common – banking practices dating back a decade. Then Angela Merkel proclaimed that Deutsche Bank would not be bailed out prior to the German elections in September 2017. These fresh catalysts pushed the stock down to new all time lows, sent Deutsche Bank’s debt into the tank, and pushed up their credit default swaps to red alert levels.