Deutsche Bank is still suffering from the global financial crisis where their stock price peaked at $125 and is now only $16.93, despite the staggering intervention from the European Central Bank (ECB).
Deutche’s revenues have been faltering due to a decline in trading revenue. DB’s trading revenue was down 30% year-on-year to €1.512 billion versus €2.162 billion in Q2 2017. Trading revenues in Q2 2017 fell 18% year-on-year to 1.666 billion euros versus 2.027 billion euros.
Hence, Deutsche Bank is now throwing a “Hail Mary pass” and hoping that leverage loan growth saves the day. A leveraged loan is a commercial loan that is extended to companies or individuals that already have considerable amounts of debt. Lenders consider leveraged loans to carry a higher risk of default, and as a result, a leveraged loan is more costly to the borrower.
That’s the ticket. Bet on risky corporate loans as your HMP (Hail Mary Pass). Well, leverage loans had their best year in 2017.
But DB’s rank in terms of leveraged loans is shrinking.
Yes, global central bank policies have definitely encourage more risk taking.
Here is Boston College’s Doug Flutie making his memorable “Hail Mary” pass against Miami. The blueprint for DB’s leverage loan pass for increased earnings.