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Will They Do It Again?

08 October 2015 by lberuti

The reporting season has not begun in earnest yet, but DB ( Deutsche Bank AG ) made sure today that results are back among investors’ top preoccupations. The bank reported a preliminary €6.2bln loss for the third quarter and said it may skip its dividend. Investors tried to assess what that could mean to Additional Tier 1 notes, as capital shortages could also lead banks to miss some of their coupons. Because of DB’s history (they were the first institution not to call perpetual bonds during the GFC), they have always thought that it was more a possibility for DB than any other banks. So it is hardly surprising that, following the report, DB’s AT1 bonds were marked down a couple of points. And, even though it is not (as it stands) a meaningful credit issue, the 5 year risk premium of DB’s senior debt was also marked a tad wider. It closed 4bps wider at 97bps, and dragged with it the highest beta names.