Yesterday, Deutsche Bank AG‘s (NYSE: DB) co-CEO John Cryan released a surprise memo saying its balance sheet “remains absolutely rock-solid.” His assertion comes amid fears that the investment bank is unstable (an understatement) – which could be emblematic of a broader European bank fueled stock market crash.
Releasing a forced statement to the worrying public is something Lehman Brothers did just before it collapsed in 2008. The now-defunct corporate banking giant assured investors that it had enough liquidity to weather the financial crisis in 2008.
Yesterday, Deutsche Bank did the same thing. It released a statement stressing there is no liquidity crisis, but conceded that capital fears were right. According to a Wall Street Journal report yesterday, the bank promised “it would have more than enough to pay the €350 million ($392 million) on existing bonds this year and next. Deutsche Bank added that in 2017 its available funds should be more than 7.5 times this coupon bill, before accounting for this year’s earnings and expected asset sales. That is important, as the bank needs to sell more of these bonds.”
Another similarity between Deutsche Bank and Lehman Bros. can be extrapolated from credit ratings. In 2008, there were few warnings that Lehman was in trouble before ratings agency Fitch issued a negative outlook on the bank in June 2008. That was three months prior to its Sept. 15, 2008, fall.
This happened to Deutsche Bank just last year…
Full article: Deutsche Bank’s Lehman Behavior Signals a Looming Stock Market Crash (Money Morning)