Deutsche Bank’s CoCo Bonds Speak of Fear of the Worst

The fine that broke the bank? Deutsche Bank investors just can’t catch a break. They keep thinking that shares have dropped so low that it’s time to grab them. Herd instinct sets in, and this buying perks up the shares. Then the bank’s sins once again come to the foreground. And what investors had grabbed was a falling knife, and fingers are now getting sliced off.
Early morning on Friday in Frankfurt – in the US, Thursday after the markets had closed, a strategic time for bad news – Deutsche Bank announced that the US Justice Department was trying to wring $14 billion out it. The fine is based on the investigation into mortgage backed securities that the bank had rolled into complex toxic products and sold to unsuspecting investors between 2005 and 2007, just before the Financial Crisis.
The Justice Department already nailed other banks for it and extracted large fines; and it’s still investigating some banks, including UBS, Credit Suisse, Royal Bank of Scotland, and Barclays – which saw their shares get pummeled today.

This post was published at Wolf Street on September 16, 2016.