A Slight Hint Of A 2011 Feel

Whenever a big bank is rumored to be in unexpected merger talks, that’s always a good sign, right? The name Deutsche Bank keeps popping up as it has for several years now, this is merely representative of what’s wrong inside of a global system that can’t ever get fixed. In this one case, we have a couple of perpetuated conventional myths colliding into what is still potentially grave misfortune.

As noted last time, I doubt DB is the next Lehman. That doesn’t mean, however, there won’t be trouble and fallout from what’s (really) going on with the institution. There is absolutely no way the German government doesn’t step in to rescue the ailing bank if it ever comes to that – which might just be only one step removed from what’s behind today’s unusual rumors.

Deutsche Bank on Thursday downplayed the idea that a deal with cross-town rival Commerzbank could materialize soon, after Bloomberg reported that top shareholders had been consulted about a potential tie-up.

It hasn’t been all that long since the spate of “cold fusions” that once gripped the European banking sector. It gives the current “dollar” situation a decided 2011 feel to it. Europe’s back at the center of eurodollar problems, again, something nobody would ever have wished for. Commerzbank itself is no healthy match, another firm that followed DB’s trend if to a substantially lesser degree.

The problem is, for once, pretty well defined at least in general terms.

Deutsche Bank, Germany’s flagship lender, is searching for new avenues of growth after it was forced to retreat from a strategy of trying to build a global investment bank.

That’s one way to put it. A more accurate way to describe the situation would be by dropping the intentionally charitable euphemism and to admit up front that DB went all in on “global growth” at the worst possible moment and in the worst possible way. They bet, heavily, on leveraged loans and corporate junk in the US (meaning energy) as well as similar capacities, meaning corporate junk, in EM locations. They did this in the middle of 2014 right at the top of both junk and the dollar.