A new document published by Deutsche Bank shows that in Q4 2011, the large German bank was leveraged at a ratio of 40:1 according to the International Financial Reporting Standards (IFRS). This is higher than Lehman Brothers had.
Deutsche Bank is Germany’s largest bank, and the biggest foreign exchange dealer in the world. There has been significant correlation between shares of European banks such as Deutsche Bank and the value of the euro in recent months.
Jean-Pierre Chevallier reports about the high leverage of Deutsche Bank, and notes that Deutsche Bank is one of the systemically important financial institutions (Sifis).
The current leverage is better than in Q3 2011, but worse than the three quarters that preceded Q3 2011, as you can see on page 16.
The bank also has another leverage ratio, which is based on its target definition. According to this measurement, the leverage ratio is only 21. Their full definition is detailed in page 17.
Although Deutsche Bank is highly leveraged for a long time, it’s important to note that Lehman Brothers was leveraged at a ratio of 31:1 before it collapsed and that these levels are not healthy.
It’s also important to note that there were reports in January that Deutsche Bank needed to raise capital.
The CEO of Deutsche Bank is Swiss banker Josef Ackermann, which will be stepping down in May 2012. The debt crisis took its toll on profits, which fell by 76% in Q4 2011.
Further reading: Lose-Lose Situation for the Euro.
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