The Institutional Risk Analyst

New York | Last week we pondered the fate of Citigroup (C) and several other global banks that have lost their raison d'être with a group of veteran treasury and operations managers. Will the bank built over the years to service the political inhabitants of the post-war Pax Americana survive another decade? Or will the relentless consolidation of the banking industry at the top continue by forcing the sale or breakup of C? During the Cold War years and after, Citi was a ver

New York | In this issue of The Institutional Risk Analyst, we talk to our friend Hans-Joachim (Achim) Dübel of FINPOLCONSULT in Berlin to provide some context for the latest troubles affecting Deutsche Bank AG (DB) and the German banking system more broadly. Dübel is one of those rare independent analysts of the banking sector in the EU and has worked on a number of internal and external debt restructurings. But first we need to comment on the end of Q1 2019 earnings and, wi

New York | First a safe and happy holiday to all. In this issue of The Institutional Risk Analyst, we ponder past prognostications and future risks in 2019. And we are happy to announce the publication of The IRA Bank Book for Q4 2018. For those of you who were furiously buying copies of the Q3 edition last week, for which we are most grateful, hit the download link again to get the Q4 edition. You’ll want to read about why US bank earnings growth is now 100% correlated to

New York | When we first heard news reports about a new investor in Deutsche Bank (DB), we of course assumed that this meant the purchase of new shares and thus an increase in capital. But no, it was merely an “activist investor” taking a stake in existing shares. Is this really news or merely a sign of a top in large bank stocks? The DB common is trading a hair over $10 or just 0.3x book value and has a beta of 1.5. Douglas Braunstein, founder and managing partner of Huds

New York – Ever heard of the European Monetary Authority? Hold that thought. For more than a decade now, banks in Europe have been free-riding on sovereign credit support, a fact that has attracted more than a few foreign investors. With the political devolution now underway in Rome, however, Eurobanks have begun to trade again on their intrinsic credit. In an important new paper from The Institute for New Economic Thinking, Professor Ed Kane of Boston College states the p

New York | Sometimes simple images are the most powerful. The chart below from FRED shows US real GDP change vs. the effective rate for Federal funds over the past five years. Just imagine around Election Day in the US this November, if the Fed funds rate is above the last print in real GDP and the gap between two year Treasury notes and ten year T-bonds is just about nada. Bad for stocks, yeah. But then maybe we see a bond market bull rally because the Street remains so p

New York | Watching the related financial dramas of China’s HNA Group and Germany’s Deutsche Bank AG (DB), we are reminded of Timothy Dickinson, who reminded us that the image of purposeful design and order imposed from above by experts and regulators is largely an illusion. The world is filled with ill-considered people and strategies, and no realm more than the intersection of public policy and corporate governance. The Federal Open Market Committee is raising short-term i

“While the US and the UK have been mired in political chaos this year, the EU has enjoyed improved economic conditions and some political windfalls. The question now is whether this good news will inspire long-needed EU and eurozone reforms, or merely fuel complacency – and thus set the stage for another crisis down the road.” Philippe Legrain Project Syndicate Dana Point | This week The Institutional Risk Analyst takes a look a the recent reports out of the EU regarding a pr