The Epic Collapse of Deutsche Bank [Chart]
A timeline showing the fall of one of Europe’s most iconic financial institutions
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
It’s been almost 10 years in the making, but the fate of one of Europe’s most important financial institutions appears to be sealed.
After a hard-hitting sequence of scandals, poor decisions, and unfortunate events, Frankfurt-based Deutsche Bank shares are now down -48% on the year to $12.60, which is a record-setting low.
Even more stunning is the long-term view of the German institution’s downward spiral.
With a modest $15.8 billion in market capitalization, shares of the 147-year-old company now trade for a paltry 8% of its peak price in May 2007.
The Beginning of the End
If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.
In recent times, Deutsche Bank’s investment banking division has been among the largest in the world, comparable in size to Goldman Sachs, JP Morgan, Bank of America, and Citigroup. However, unlike those other names, Deutsche Bank has been walking wounded since the Financial Crisis, and the German bank has never been able to fully recover.
It’s ironic, because in 2009, the company’s CEO Josef Ackermann boldly proclaimed that Deutsche Bank had plenty of capital, and that it was weathering the crisis better than its competitors.
It turned out, however, that the bank was actually hiding $12 billion in losses to avoid a government bailout. Meanwhile, much of the money the bank did make during this turbulent time in the markets stemmed from the manipulation of Libor rates. Those “wins” were short-lived, since the eventual fine to end the Libor probe would be a record-setting $2.5 billion.
The bank finally had to admit that it actually needed more capital.
In 2013, it raised €3 billion with a rights issue, claiming that no additional funds would be needed. Then in 2014 the bank head-scratchingly proceeded to raise €1.5 billion, and after that, another €8 billion.
A Series of Unfortunate Events
In recent years, Deutsche Bank has desperately been trying to reinvent itself.
Having gone through multiple CEOs since the Financial Crisis, the latest attempt at reinvention involves a massive overhaul of operations and staff announced by co-CEO John Cryan in October 2015. The bank is now in the process of cutting 9,000 employees and ceasing operations in 10 countries. This is where our timeline of Deutsche Bank’s most recent woes begins – and the last six months, in particular, have been fast and furious.
Deutsche Bank started the year by announcing a record-setting loss in 2015 of €6.8 billion.
Cryan went on an immediate PR binge, proclaiming that the bank was “rock solid”. German Finance Minister Wolfgang Schäuble even went out of his way to say he had “no concerns” about Deutsche Bank.
Translation: things are in full-on crisis mode.
In the following weeks, here’s what happened:
- May 16, 2016: Berenberg Bank warns that DB’s woes may be “insurmountable”, noting that DB is more than 40x levered.
- June 2, 2016: Two ex-DB employees are charged in ongoing U.S. Libor probe for rigging interest rates. Meanwhile, the UK’s Financial Conduct Authority says there are at least 29 DB employees involved in the scandal.
- June 23, 2016: Brexit decision hits DB hard. The bank is the largest European bank in London and receives 19% of its revenues from the UK.
- June 29, 2016: IMF issues statement that “DB appears to be the most important net contributor to systemic risks”.
- June 30, 2016: Federal Reserve announces that DB fails Fed stress test in US, due to “poor risk management and financial planning”.
Doesn’t sound “rock solid”, does it?
Now the real question: what happens to Deutsche Bank’s derivative book, which has a notional value of €52 trillion, if the bank is insolvent?
Which Companies Make Up the “Magnificent Seven” Stocks?
FAANG is dead… meet the ‘Magnificent Seven’ stocks that now make up over 25% of the S&P 500.
Which Companies Make Up the “Magnificent Seven” Stocks?
In 2013 CNBC analyst Jim Cramer popularized “FANG,” comprised of Facebook (now Meta), Amazon, Netflix, and Google (now Alphabet), as a shorthand for the best performing technology stocks on the market. Apple, added in 2017, made it FAANG.
However, over the last year a new moniker given by Bank of America analyst Michael Hartnett highlights the most valuable and popularly-owned companies on the American stock market: the “Magnificent Seven” stocks.
We visualize the Magnificent Seven’s market capitalization and 5-year stock performance as of November 2023 using data from Google Finance and CompaniesMarketCap.
The Magnificent Seven Stocks by Market Cap and 5-Year Return
The Magnificent Seven stocks are megacap companies focused and capitalizing on tech growth trends including AI, cloud computing, and cutting-edge hardware and software.
Four of the five FAANG stocks retain their place amongst the Magnificent Seven, with newcomers Nvidia, Tesla, and Microsoft joining the group. Following a poor 2022 performance and having more difficulty capitalizing on tech trends, Netflix is the sole FAANG company not included.
Here’s a look at the companies ranked by their market capitalization on November 6, 2023, alongside their 5-year stock performance:
|Rank||Company||Market Cap||5 Year Performance|
The Magnificent Seven make up more than one-quarter of the S&P 500 and more than half of the Nasdaq 100.
Meanwhile, five of the seven are part of the rare trillion dollar club, with Nvidia being the most recent entry.
A common theme among the Magnificent Seven is their ability to collect vast amounts of customer data, create cutting-edge hardware and software, as well as harness the power of AI.
However, if Netflix gets back on track—recently announcing its new ad-supported membership tier has 15 million subscribers—we could soon see a “Magnificent Eight.”
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