It’s Not Just Deutsche Bank. The Entire Financial Sector Is Sick

These are great times for financial assets — and by implication for finance companies that make and sell them, right?

Alas, no. Just the opposite. Each part of the FIRE (finance, insurance, real estate) economy is imploding as “modern” finance hits the wall.

Interest rates, for instance, have fallen for three decades…

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Stock prices are at record levels…

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And real estate is revisiting its recent bubble.

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In this kind of paper paradise it’s no surprise that banks and their cousins have grown fat, happy and arrogant. And with the above trends now ending, it’s also no surprise that business models premised on their continuance are failing. Everyone by now knows the Deutsche Bank story of bloated costs, horrendous derivatives exposure and debilitating criminal penalties. But lots of other finance companies are staring into the same abyss. Some notable examples:

Is another German bank in trouble? Commerzbank to cut 9,600 jobs and suspend dividend

(Telegraph) – Commerzbank, the second-biggest bank in Germany, has suspended its dividend and revealed more than 9,000 job losses as it tries to shore up its business in the face of ultra-low interest rates and sagging client activity.
The bank said its decision to cut almost one in five of its employees worldwide and merge two of its largest businesses will result in a €700m write-off and a loss for this quarter.

The bank’s Mittelstand division, seen as the engine room of Germany’s mid-sized corporate economy, will be combined with its corporate branch, while investment activity will be scaled back.

Commerzbank also warned that “ongoing weakness in the shipping markets” would push up its loan loss provisions in the coming months. The bank decided four years ago to exit the ship financing business but still has about €8bn on its books.

“We simply don’t earn enough money to lead the bank sustainably and successfully into the future. And this situation will get worse if we don’t do something about it,” chief executive Martin Zielke said in a draft note to employees, according to Reuters.

The bank will cease dividend payments “for the time being”, prompting analysts at RBC Capital Markets to scrap their forecasts for payments until at least 2018.

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ING Plans Thousands of Job Cuts

(Bloomberg) – ING Groep NV, the largest Netherlands lender, will announce thousands of job cuts at its investor day on Monday, Dutch newspaper Het Financieele Dagblad reported Friday, citing unidentified people with knowledge of the matter.The reorganization will result in more central management and may generate billions of euros in savings, the paper said. Raymond Vermeulen, a spokesman for the Amsterdam-based bank, declined to comment on the report. The bank employs about 52,000 people, according to its website.

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John Rubino

DollarCollapse.com is managed by John Rubino, co-author, with GoldMoney’s James Turk, of The Money Bubble (DollarCollapse Press, 2014) and The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He currently writes for CFA Magazine.