Opinions
Brooke Thackray
Deutsche Bank AG
DB-N
COMMENT
Oct 27, 2017
Stock price when the opinion was issued
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DB has fallen 94% since just before 2008 and on paper, this is a very similar pattern to CS. DB is down ~6% today and its Credit Default Swaps (CDS) have been moving substantially higher today, indicating that investors are paying up for insurance in the event that DB fails or defaults. At times, these events can become a self-fulfilling prophecy, and a material decline in its share price can lead to fewer funding options and a worse liquidity picture for the company. The Fed and other central banks around the world established open swap lines the other weekend so that in the event of depositors withdrawing funds from a foreign bank, that foreign bank can call upon the Fed and receive par for US Treasury Bills, even if they are well below par on the market. This was not established when CS failed, and we feel that this might help to alleviate any issues with DB.
Overall, as we've learned, these events can happen fast, and we're not ruling out the possibility of DB failing, but everyone, including the Fed and the US Treasury are keeping a closer eye on these possibilities and we think that higher level of scrutiny should help to quickly respond to any weaknesses in the bank.
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There was lots of press about them going to go under. While the global economy is going well, even if there is stuff hidden underneath the carpets, it is probably not going to come out. If you believe the global economy is doing well, then you would expect this company to come out and do okay. Chart shows the stock is trading in a channel and is currently at the bottom of the channel, which is good right now.