Strategy 2015+

  • 31 Jan 2013 at 2:04 PM
  • Banks

Deutsche Bank Improved Its Balance Sheet By Losing A Lot Of Money

Bank earnings season is always a little surreal, I guess because there’s an inherent surrealism about banking. Deutsche Bank reported earnings today,1 and those earnings had an up-is-down quality that Bloomberg’s summary captured in this amazing sentence:2

Deutsche Bank AG, Europe’s biggest bank by assets, exceeded a goal for raising capital levels as co-Chief Executive Officer Anshu Jain focused on bolstering the firm’s finances rather than limiting losses.

So there’s one way of running a business where you bolster your finances by making money. And then there is global banking. Here is another, possibly even more astonishing line from the same article:

Deutsche Bank “took pain” in the quarter by booking a loss to boost its capital ratio without selling shares, Jain said.

Booking a loss to boost its capital ratio. Losing money, in the regular universe, should reduce your capital: capital is mostly retained earnings. Everything here is backwards.

Here is how Deutsche Bank boosted its capital ratios without (1) raising capital from the market or (2) making money: Read more »