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?
The Biggest Tech Talent Hubs in the U.S. and Canada
6.5 million skilled tech workers currently work in the U.S. and Canada. Here we look at the largest tech hubs across the two countries
The Biggest Tech Talent Hubs in the U.S. and Canada
The tech workforce just keeps growing. In fact, there are now an estimated 6.5 million tech workers between the U.S. and Canada — 5.5 million of which work in the United States.
This infographic draws from a report by CBRE to determine which tech talent markets in the U.S. and Canada are the largest. The data looks at total workforce in the sector, as well as the change in tech worker population over time in various cities.
The report also classifies which metro areas and regions can rightly be considered tech hubs in the first place, by looking at a variety of factors including cost of living, average educational attainment, and tech employment levels as a share of different industries.
The Top Tech Hubs in the U.S.
Silicon Valley, in California’s Bay Area, remains the most prominent (and expensive) U.S. tech hub, with a talent pool of nearly 380,000 tech workers.
Here’s a look at the top tech talent markets in the country in terms of total worker population:
|🇺🇸 Market||Total Tech Talent||% Talent Growth (2016-2021)|
|SF Bay Area||378,870||13%|
|New York Metro||344,520||3%|
|Salt Lake City||55,930||29%|
America’s large, coastal cities still contain the lion’s share of tech talent, but mid-sized tech hubs like Salt Lake City, Portland, and Denver have put up strong growth numbers in recent years. Seattle, which is home to both Amazon and Microsoft, posted an impressive 32% growth rate over the last five years.
Emerging tech hubs include areas like Raleigh-Durham. The two cities have nearly 70,000 employed tech workers and a strong talent pipeline, seeing a 28% increase in degree completions in fields like Math/Statistics and Computer Engineering year-over-year to 2020. In fact, the entire state of North Carolina is becoming an increasingly attractive business hub.
Houston was the one city on this list that had a negative growth rate, at -2%.
The Top Tech Hubs in Canada
Tech giants like Google, Meta, and Amazon are continuously and aggressively growing their presence in Canada, further solidifying the country’s status as the next big destination for tech talent. Here are the country’s four tech hubs with a total worker population of more than 50,000:
|🇨🇦 Market||Total Tech Talent||% Talent Growth (2016-2021)|
Toronto saw the most absolute growth tech positions in 2021, adding 88,900 jobs. The tech sector in Canada’s largest city has seen a lot of momentum in recent years, and is now ranked by CBRE as North America’s #3 tech hub, after the SF Bay Area and New York City.
Vancouver’s tech talent population increased the most from its original figure, climbing 63%. Seattle-based companies like Microsoft and Amazon have established sizable offices in the city, adding to the already thriving tech scene. Furthermore, Google is set to build a submarine high-speed fiber optic cable connecting Canada to Asia, with a terminus in Vancouver.
Not to be left behind, Ottawa has also taken giant strides to increase their tech talent and stamp their presence. The country’s capital even has the highest concentration of tech employment in its workforce, thanks in part to the success of Shopify.
The small, but well-known tech hub of Waterloo also had a very high concentration on tech employment (9.6%). The region has seen its tech workforce grow by 8% over the past five years.
Six out of the top 10 cities by tech workforce concentration are located in Canada.
Evolution of Tech Hubs
The post-COVID era has seen a shifting definition of what a tech hub means. It’s clear that remote work is here to stay, and as workers migrate to chase affordability and comfort, traditional tech hubs are seeing some decline — or at least slower growth — in their population of tech workers.
While it isn’t evident that there is a mass exodus of tech talent from traditional coastal hubs, the rise in high-paying tech jobs in smaller markets across the country could point to a trend and is positive for the industry.
While more workers with great talent, resources, and education continue to opt for cost-friendly places to reside and work remotely, will newer markets like Charlotte, Tennessee, and Calgary see a rise of tech companies, or will large corporations and startups alike continue to opt for the larger cities on the coast?
Animation: Visualizing U.S. Interest Rates Since 2020
U.S. interest rates have risen sharply after sitting near historic lows. This animation charts their trajectory since 2020.
Visualizing Interest Rates Since 2020
In March 2020, the U.S. Federal Reserve cut already depressed interest rates to historic lows amid an unraveling COVID-19 pandemic.
Fast-forward to 2022, and the central bank is grappling with a very different economic situation that includes high inflation, low unemployment, and increasing wage growth. Given these conditions, it raised interest rates to 2.25% up from 0% in just five months.
The above visualization from Jan Varsava shows U.S. interest rates over the last two years along with its impact on Treasury yields, often considered a key indicator for the economy.
Timeline of Interest Rates
Below, we show how U.S. interest rates have changed over the course of the pandemic:
|Date||Federal Funds Rate (Range)||Rate Change (bps)|
|July 27, 2022||2.25% to 2.50%||+75|
|June 16, 2022||1.50% to 1.75%||+75|
|May 5, 2022||0.75% to 1.00%||+50|
|March 17, 2022||0.25% to 0.50%||+25|
|March 16, 2020||0.00% to 0.25%||-100|
|March 3, 2020||1.00% to 1.25%||-150|
In early 2020, the Federal Reserve cut interest rates from 1% to 0% in emergency meetings. The U.S. economy then jumped back from its shortest recession ever recorded, partially supported by massive policy stimulus.
But by 2022, as the inflation rate hit 40-year highs, the central bank had to make its first rate increase in over two years. During the following Federal Reserve meetings, interest rates were then hiked 50 basis points, and then 75 basis points two times shortly after.
Despite these efforts to rein in inflation, price pressures remain high. The war in Ukraine, supply disruptions, and rising demand all contribute to higher prices, along with increasing public-debt loads. In fact, a Federal Reserve estimate suggests that inflation was 2.5% higher due to the $1.9 trillion stimulus, an effect of “fiscal inflation.”
Impact on the Treasury Yield Curve
The sharp rise in interest rates has sent shockwaves through markets. The S&P 500 Index has steadily declined 19% year-to-date, and the NASDAQ Composite Index has fallen over 27%.
Bond markets are also showing signs of uncertainty, with the 10-year minus 2-year Treasury yield curve acting as a prime example. This yield curve subtracts the return on short-term government bonds from long-term government bonds.
When long-term bond yields are lower than short-term yields—in other words, the yield curve inverts—it indicates that markets predict slower future growth. In recent history, the yield curve inverting has often signaled a recession. The table below shows periods of yield curve inversions for one month or more since 1978.
|Yield Curve Inversion Date||Number of Months||Maximum Difference (10 yr - 2 yr bps)|
*Data as of September 9, 2022
Source: Federal Reserve
For example, the yield curve inverted in February 2000 to a bottom of -51 basis points difference between the 10-year Treasury yield and the 2-year Treasury yield. In March 2001, the U.S. economy went into recession as the Dotcom Bubble burst.
More recently, the yield curve has inverted to its steepest level in two decades.
This trend is extending to other countries as well. Both New Zealand and the UK’s yield curves inverted in August. In Australia, the yield spread between 3-year and 10-year bond futures—its primary measure—was at its narrowest in a decade.
What’s On the Horizon?
Sustained Treasury yield inversions have sometimes occurred after tightening monetary policy.
In both 1980 and 2000, the Federal Reserve increased interest rates to fight inflation. For instance, when interest rates jumped to 20% in 1981 under Federal Reserve Chairman Paul Volcker, the U.S. Treasury yield inverted over 150 basis points.
This suggests that monetary policy can have a large impact on the direction of the yield curve. That’s because short-term interest rates rise when the central bank raises interest rates to combat inflation.
On the flip side, long-term bonds like the 10-year Treasury yield can be affected by growth prospects and market sentiment. If growth expectations are low and market uncertainty is high, it may cause yields to fall. Taken together, whether or not the economy could be headed for a recession remains unclear.
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