segunda-feira, 3 de outubro de 2016
Angela Merkel shorts Deutsche
Angela Merkel shorts Deutsche
Germans aren’t great fans of bank rescues, but Deutsche occupies a unique place in the economy.
By MATTHEW KARNITSCHNIG 10/2/16, 11:32 PM CET Updated 10/3/16, 5:27 AM CET
BERLIN — Deutsche Bank has spent much of the past two weeks blaming its spiraling share price on foreign media “speculation” that it would have to pay a $14 billion fine in connection with its role in the U.S. housing crisis. In private, German bankers identify a culprit closer to home — Angela Merkel.
Given the opportunity to douse rumors that Berlin was not prepared to jump to Deutsche’s rescue last week if need be, the German leader stayed mum.
“There’s no reason for such speculation,” Merkel’s spokesman said last Monday in response to a report in the weekly Focus that the government was prepared to let Deutsche fend for itself. Investors looking for a full-throated defense of Germany’s most important financial group got mealy-mouthed political speak instead. The bank’s shares went into a nosedive, fanning fears the German financial behemoth could become the next Lehman Brothers.
If that weren’t bad enough, government officials denied a report on Wednesday that they were preparing a rescue plan for Deutsche, pushing the shares to fresh lows.
Berlin’s ham-handed response to the crisis prompted speculation that Merkel was refusing to help for fear of a political backlash. A bailout of Deutsche Bank on the heels of her struggles with the refugee crisis could sink Merkel’s hopes for another term, the prevailing wisdom holds.
The reality is somewhat more complicated.
For better or worse, Deutsche Bank is the epitome of “too big to fail.”
If nothing else, Merkel has proved after more than a decade in office that she doesn’t put Germany’s strategic interests at risk for short-term political gain. And when it comes to the smooth functioning of the German economy, no institution in Germany is more strategic than the country’s largest bank. For better or worse, Deutsche Bank is the epitome of “too big to fail.”
To put its position into context, consider that its total assets are roughly half the size of the Germany economy. Put another way, to build a financial institution of similar dimension in the U.S. would entail combining the top five American banks.
Considering Deutsche’s unique position in the German economy, it’s far from clear there would be much of a political backlash were a bailout necessary. Germans don’t like rescuing banks any more than citizens of other countries. But when the stability of their financial system is hanging in the balance, they’ve proved to be very tolerant.
If Germans were up in arms over Merkel’s decision in 2008 to establish a fund worth hundreds of billions of euros to support the country’s flagging financial sector, for example, they didn’t show it at the ballot box. Less than a year later, she won reelection by a wide margin.
Flouting the rules
The real reason for Berlin’s reluctance to openly stand behind Deutsche in the face of the pressures the bank faces is Europe. At a time when Germany is encouraging other countries to take the state aid restrictions enshrined in the European Union’s new bank rescue framework seriously, it can’t afford to appear to flout those rules itself, even in spirit. In trying to show there’s no double standard, Merkel may have just made matters worse.
So far, officials in Berlin continue to insist the issue is being blown out of proportion. At a meeting of the executive committee of Merkel’s Christian Democrats last week, Deutsche Bank was not even discussed, according to a person who was there. Merkel also didn’t raise the banks plight during a phone call with U.S. President Barack Obama last week. It’s a subject for “connoisseurs,” said a senior Bundestag aide. German officials say they are confident the U.S. fine will be significantly reduced and that there’s no reason to even begin thinking about a bailout.
The question is whether the government’s confidence is misplaced. There has been no shortage of detailed, sober analyses in recent days attesting to the relative stability of Deutsche’s balance sheet. As Chief Executive John Cryan pointed out, the bank is much less risky today than it has been in years. It has both reduced its exposure to risky assets and increased its capital cushion. Still, the bank is still considered among the world’s riskiest. Investors know that a loss of trust like that threatening Deutsche can quickly spin out of control. Yet when the market looked to Merkel for reassurance, she wasn’t there.
Rumors have been swirling about Deutsche Bank’s fragility for years. In the wake of the financial crisis it avoided a bailout, mainly because investors were confident that Berlin would stand behind it, come hell or high water.
Merkel’s silence this week suggested that’s now changed.
Germany’s biggest companies are getting nervous. Companies like Siemens and Mercedes-parent Daimler rely on Deutsche to provide them with commercial banking services around the world. They regard the bank as an essential cog in the engine driving Germany’s export-driven economy.
“Strong German banks are important for a strong Germany economy” — Daimler Chief Executive Dieter Zetsche
“Strong German banks are important for a strong Germany economy,” Daimler Chief Executive Dieter Zetsche told Frankfurter Allgemeine’s Sunday edition. “This relationship is close and it will remain so.”
He wasn’t alone. That paper quoted more than half a dozen prominent corporate leaders on its front page, each delivering testimonials for Deutsche.
“Germany’s industry needs a Deutsche Bank to accompany it in the world,” Jürgen Hambrecht, chairman of chemical giant BASF, said.
While the chancellor would no doubt agree, it’s unclear if she shares the executives’ urgency.
If not, Monday’s trading session looks likely to offer another reminder that Berlin’s decision to stay on the sidelines remains risky.
Rumor of a pending settlement between Deutsche and the U.S. Justice Department fueled a rally in its shares on Friday. But a deal didn’t materialize over the weekend, sparking predictions of a further sell-off when trade resumes. German markets will be closed for a national holiday on Monday, but New York where the bank shares are also traded will be open.
“So long as a fine of this order of magnitude is an even remote possibility, markets worry,” UniCredit economist Erik Nielsen warned clients on Sunday.