Nery Alaev

Deutsche Bank in trouble: what brought about recent turbulence?

Nery Alaev writes about the issues surrounding Deutsche Bank.

The largest bank in Germany has recently made the news due to its ongoing struggles with re-organisation, mounting legal bills and negative interest rates among other challenging factors. Bloomberg has published an article that has succinctly summarised the issues faced by Deutsche Bank.

Today, I’ve decided to look at the article among others and make a summary.

Deutsche Bank's HQ. Nery Alaev discusses Deutsche Bank.

The historic bank has several issues.

Heavy price to pay

The article begins with what is perhaps one of largest threats to Deutsche Bank (DB) currently – the prospect of a multibillion dollar fine levelled by the US Department of Justice due to claims that the bank sold fraudulent securities.

This amount has been regarded as high, so high that DB simply can’t afford it without outside help from investors or the German state – this has subsequently rattled investors around the globe.

Since the beginning of 2016, shares in the bank are down over 50% as current CEO John Cryan has been overseeing mass layoffs, removal of ‘unprofitable’ clients and a general retreat from business.

Problem for Germany

Deutsche Bank has been profiled as an integral feature of the German economy, so its failure would be a disaster for Chancellor Angela Merkel, who is already embattled due to the refugee crisis.

However, it’s wrong to think the fall of Deutsche Bank would be isolated to Germany – all of Europe would be effected, especially France and Italy thanks to their respective zero-rate growth. On top of this, Brexit has recently shaken Europe’s frail banking sector and has caused mass uncertainty among banking professionals and ordinary citizens alike.

The German Government has remained as stoic as ever, with a spokesperson stating recently that:

„There is no reason for such speculation as presented there and the federal government doesn’t engage in such speculation.“

This statement was made in regards to rumours about potential state aid for DB – it seems that the Government doesn’t want to add to the growing list of voices concerned about the future of Deutsche Bank.

Nery Alaev

Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.