It cost "only couple of billion euros"...

I am not sure – didn’t the chief of Deutsche Bank John Cryan admit little bit too much than he was intending to? Bank’s chief executive wrote an open letter to his employees which sounds surprisingly honest and provides more generally known information about the bank. The good news is that Deutsche Bank surprisingly showed a somewhat bigger profit for the third quarter of this year than it was assumed. The reason for that is a slight improvement on the bonds market which the bank trades. The worse news is that the negotiation about the fine which the bank leads with American ministry of justice for the sketchy businesses with mortgage-backed securities from the times of crisis between the years 2008-2009 are not at the end.

While everybody clearly remembers how the sharp fall of the bank’s stocks was stopped only because of the speculations that the fine will be significantly lowered and that the negotiations about its reducing are basically at the end. A month later the chief of the bank still keeps talking about how he is trying to bring the negotiations to the end “as soon as possible”. Same fantasies like we heard last month. The bank also admits via chief’s mouth that the situation keeps being complicated even though the outflow of liquidity was stopped. We can understand that as that who wanted to be super-careful and decided to withdraw the money from Deutsche Bank already did it. It cost the bank couple of million euros, specifically since June 2013 23 billion on the cash reserves but now there are no more super-careful clients anymore and no more withdrawals are happening.

(Just between us one thing is to warn about the stocks of the bank which we are still doing but the security of the deposits is something else. I can hardly imagine safer bank from the point of deposit security than the biggest German bank and even in the case that it would totally hypothetically go bankrupt. For the German government it is unimaginable to not protect these deposits.)

Either way, just as important is the sentence in the letter to employees mentioning the fact that bank is going to “restructure faster and with higher intensity, specifically in the form or cutting down the number of employees so it can face the tough banking environment in Europe”. Bingo! Finally, somebody admitted that the entire banking environment in Europe is getting riskier. We have already known that but so far it wasn’t acknowledged by any official authorities.

If we are going to read very carefully in between lines we are able to identify new and very obvious risk not only for Deutsche Bank but also for other European banks as well. Unexpected profit in the third quarter was the result of slight improvement of the bond market’s condition. And the chief of Deutsche is admitting that the involvement of the bank in the trade with bonds is still very significant. Except at the same time, we know that European central bank (ECB) is announcing ending the bonds buyout programme in the spring. Which in other words means that ECB will stop artificially pushing the prices of bonds up. These bonds could be another problem for those banks that are too involved in this kind of trade. So all we have left is to say that this affair of the “bank” is definitely not at its end.