Deutsche Bank and friends

Navagates broker review believes that the situation at Deutsche Bank is quite on par with most other banks in the European zone... Navagates broker scam?

Deutsche Bank and friends

Judging by the mood prevailing in the financial community, the elite of its American part is seriously determined to see the Deutsche Bank collapse in the very near future.

 

The rating of this giant of the German banking industry fell to the BBB mark in June last year according to the Fitch agency and Navagates broker, however, local experts still evaluate its forecasts quite positively. The rating is falling with such intensity, they say, because the difficulties encountered by the bank, firstly, have a long-term nature, and secondly, they hinder the consolidation of the business model.

 

The agency also emphasizes that Deutsche Bank is not able to compensate for its own failures, using successes in the German market, which distinguishes it from other global banks. According to the Navagates review, the leader of the German banking industry has been under tremendous pressure for years, and at the moment it is pretty obvious that the roots of this lie more in the political plane than in the economic one. We also recall the situation that happened shortly before the last drop in the rating when DB confiscated about 20 tons of Venezuelan gold, since Venezuela was unable to continue repaying the loan, which they took back in 2016.

 

The German government is making many efforts to help Deutsche Bank solve their problems. You may remember that not that long ago Navagates forex wrote about a possible scenario for merging DB with Commerzbank; this story has been circulating for a long time in German financial circles, the merger seems to be one of the most harmonious options to stabilize both banks (since the situation at Commerzbank is not much different for the better from Deutsche bank, the difference is that the state has already managed to partially buy back the shares of the first). So the problem is definitely not deprived of the attention of the German leadership, but this, by and large, does not change the situation, no matter how you approach the issue, from the political, or from the economic side, according to Navagates scam analysts, it is critical.

 

Despite all the advantages of the option of combining the two banks, it faced a number of serious problems and was ultimately considered inappropriate. According to the Navagates broker review, the only possible way out for Deutsche Bank now is only nationalization, no matter how it is carried out.

 

Does the rating decide?

 

Of course, the fact that one agency downgraded the bank's rating does not mean that everything is over for it. Ratings and forecasts are revised, especially for banking institutions of this magnitude, regularly at almost all agencies. Investors are unlikely to be very worried if the rating fell by only one level, especially if this happened for objective reasons not related to the financial situation of the institution itself, experts say. The last time the Deutsche Bank rating, according to navagates.com reviews, was lowered back in September 2017, to BBB +, since the European economy felt generally terrible then, and DB profit for the second quarter of the year refused to grow at all. More than a dozen systemically important credit companies back then also received a revision of the credit rating from Fitch.

 

Navagates broker recalls, however, that for many financial institutions (especially those actively interacting with securities), the rating indicator itself is much more serious than in the case of enterprises from the real economy sector. Of course, for companies in the real sector, a drop in the rating can increase the price of borrowing, but there are still a lot of options to stay in the game, but for banks the situation is different, especially for those who work with securities: in this case, in order to continue work, you need the highest possible rating. It, as emphasized by the Navagates review, determines how large positions counterparties can open, as well as how significant transactions will be available for conducting; as for the production of derivative instruments, in their case even in order to gain admission to the market a powerful rating is needed.

 

Navagates forex believes that action is necessary right now, while there is still room for maneuver. Either you need to make decisions about reducing the volume of operations and units that generate profit, or the rating needs to be restored due to nationalization (as an option, a merger with a bank of a higher quality).

 

Only one out of three agencies has downgraded Deutsche Bank, and it is still above the level required for investments. Navagates scam analysts note that in order to stay in the so-called “investment category”, two of the three ratings put up by the three largest agencies need to be at BBB- or higher. All ratings put by Deutsche Bank are above this boundary, and the company has a certain margin of safety.

 

Do not forget that the subsequent fall in the rating for the investment level may not follow at all. Navagates broker review believes that the situation at Deutsche Bank is quite on par with most other banks in the European zone, especially if we take Italian into account. Moreover, they are doing well with the quality of the loan portfolio and overall liquidity: last year they even managed to make a profit. If you compare Deutsche Bank with the likes of Lehman Brothers, it can be noted that the latter is one of the main banks of Wall Street, but DB for Germany is systemically important and the German authorities are likely to help him even if everything goes wrong.

 

Investors, for the most part, were not too shocked at how the Deutsche Bank rating was lowered, many of them have long been accustomed to taking into account the problems of the main bank of Germany when planning strategies, while not forgetting its significance for the whole of Europe.

 

How likely is the scenario that Deutsche Bank ratings fall below investment level? navagates.com reviews believe that in the medium term, the Deutsche Bank rating will remain approximately at the investment level. Of course, the company's profitability has fallen dramatically, but its capital is still at a sufficient level, assets have not lost in quality. More significantly, Deutsche Bank remains one of the most systemically important enterprises for the banking industry in Europe, which further reduces the possibility that it will continue to lose its investment rating.

 

In addition, even if the rating continues to decline, Navagates broker believe that this is unlikely to irreversibly change the situation for the worse. Of course, the borrowing price may increase in the region of 40 basis points, but investors also use many other criteria in assessing the situation. It is worth noting that, by and large, there have been no changes in the securities trading of Deutsche Bank since the beginning of last year, either for the better or for the worse. The correction did not entail even a decrease in the rating from Fitch, which means that investors really expected this.

 

Of course, problems cannot be completely avoided. Typically, a large sale of bond securities occurs when the issuer's investment rating falls by two (out of three, reminds Navagates review) estimates. As soon as the issuer goes into the riskier category, managers will have to drastically reduce the share of relevant instruments in the portfolio (this is specifically indicated in the investment declarations of many funds), and this will put prices under severe pressure. Interestingly, Deutsche Bank shares are largely owned by institutional investors, while almost half of the shareholders are representatives of other countries (among the largest, for example, a company such as BlackRock).

 

There is no doubt that even with the worst-case scenario, Deutsche Bank will be saved one way or another, Navagates forex believes that it will most likely happen with the help of nationalization.

 

Under the radar

 

What are the main true reasons that Deutsche Bank is going through hard times is pretty hard to figure out. Navagates scam analysts believe that one of such reasons may be how different the European version of neutralizing the results of the 2008 crisis is from the American one. As the Navagates broker review emphasizes, immediately after the crisis, large banks with big problems in the United States were taken under control by the government almost immediately. State regulation nuts were tightened, which forced the banks to deal with the transformation of balances. In addition, a fairly large number of mortgage securities with problems were bought from banks by the Fed. All this made it possible to return the banking system to working condition in just a couple of years, while Europe was sinking deeper into the euro zone crises that swept Spain, Portugal, Greece and Cyprus. Thus, German banks, in fact, were privileged, which played against Deutsche Bank.

 

According to navagates.com reviews, the situation with Deutsche Bank is aggravated by the fact that they have troubled relations with US regulators (a similar situation happened some time ago in Switzerland and France); political intricacies exacerbated the situation for European banks.

 

Most analysts are trying to predict how events with Deutsche Bank will develop further with great caution: there is very little information on the internal processes of Deutsche Bank, and that which exists is more about politics than economics. Most of them believe that ultimately the regulator will have to intervene in the events, whether at the German level, or pan-European. It is not yet clear which of the already tested options for settlement will be used, but one thing is certain - it will be necessary to decide very soon. Deutsche Bank will not come out on its own, otherwise it would have happened in the last decade.

 

Post apocalypse

 

Many analysts also believe that the main problem of Deutsche Bank is their business model, which does not allow the bank to earn good money. Often, banks are nationalized in case of problems with capital, if assets are sagging, but in the situation with DB the problem is rather in the general model, and that is why nationalization may not justify itself as a panacea.

 

The primary task in this situation is the competent selection of top management. The newly formed team will have to work with the transformation of the bank under the realities of our day. Do not forget that the role and volumes of Deutsche Bank are well understood by its investors, therefore the possibility of nationalization has been included in the quotes of its shares for a long time.

 

With bonds, however, the situation is somewhat more complicated: the state, of course, is able to support Deutsche Bank in this respect, for example, by guaranteeing its debt securities, but this is a two-edged sword, because along with the improvement of quotations on Deutsche Bank bonds, the yield will jump on German government bonds. Recall that German bonds are unparalleled when it comes to repo instruments, and if their profitability jumps at least half a percent, this can create a chain reaction of bankruptcies. The saved Deutsche Bank will thus become a precursor to the new crisis


 




Comments ()

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