The mighty Deutsche Bank has fallen. Before the 2007 – 2008 Great Recession, Deutsche Bank dominated investment banking and fixed income across the planet. Deutsche was Europe’s proud jewel to compete against U.S. Wall Street banking firms like JP Morgan Chase and Goldman Sachs.

The mighty Deutsche Bank is no more.

Deutsche Bank is retreating from investment banking as it cuts 18,000 jobs.

The bank is ending its global equities business and massively scaling back its investment bank. It’s also cutting some of its bond fixed income operations.

Deutsche Bank is clearly trying to save itself and not completely collapse.

A whopping 74 billion euros of toxic debt will be put into a “bad bank” and these toxic assets will be sold for pennies on the dollar.

The cuts were foreshadowed on Friday, when the head of Deutsche’s investment bank Garth Ritchie was let go.

“Today we have announced the most fundamental transformation of Deutsche Bank in decades. We are tackling what is necessary to unleash our true potential: our business model, costs, capital and the management team. We are building on our strengths. This is a restart for Deutsche Bank – for the long-term benefit of our clients, employees, investors and society”, CEO Christian Sewing said in a statement.

Deutsche Bank has immediately suspended all dividends for 2019 and 2020.

Smart money began selling out of DB stock around June 24, 2019, as evidenced by the falling large players volume.

A large number of job cuts will be in New York as DB’s equity division was headquartered there.

Deutsche Bank is in big trouble as the investment bank division generates about half of Deutsche’s revenue. Now that DB is cutting back the investment bank division, it will take a big hit to revenue.

The Biggest Bank Failure Since The Financial Crisis

The fall and restructuring of DB is the biggest bank failure since the financial crisis. Banks are systemic by nature and so what sort of impact is this going to have on other banks?

It is estimated that a total collapse of DB would be 20x worse than the collapse of Lehman.

If DB’s massive derivatives holdings begin to unwind in panic, it could negatively impact global markets next week.

That’s a $43 trillion derivatives position (notional value) which is twice the size of the entire U.S. GDP.

Let’s keep watch on any defaults of member CCPs which would start a default waterfall and that would impact the Nasdaq and markets around the world.

Deutsche Bank In the News