FAST FIVE: Deutsche Bank To Launch €50 Billion "Bad Bank" Housing Billions In Toxic Derivatives
Just last week, Jeff Gundlach – in his latest DoubleLine investor call – cracked jokes that Deutsche Bank's imploding stock which has been hitting fresh all time lows virtually every day, has a major support area at €0.
While the derivatives destined for the non-core unit still provide some cash flow, all the profit on the deals – and therefore the associated bonuses for those who arranged them – were booked up-front.
In response to the FT article, DB said in a statement: “Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability.
Here is the IMF's chart showing the key linkages of the world's riskiest bank: Since then, the gross notional value of derivatives on DB's balance sheet has indeed shrunk, but so has its equity market cap.
So should things turn bad, it is virtually certain that Germany's taxpayers will once again be on the hook for the most important bank bailout in European history.