* Large U.S. banks are rapidly gaining share in fixed income trading and retail and corporate lending
Deutsche Bank's shares hit another new low overnight.
As I have written in the past, I view (DB) as the next Black Swan in Europe:
"Like Sears (SHLD) , Deutsche Bank has no current profits, is in a state or operating flux, is being forced to sell assets, has an extremely low equity capitalization and a large and leveraged balance sheet.
Consider that DB's equity cap is only about $23 billion, compared to $170 billion for Citigroup (C) - even though both have a comparable amount of assets on their balance sheet ($1.75 trillion).
Deutsche Bank generates less than $50 billion in revenues (which is moving lower as it jettisons losing or capital intensive operating assets) compared to $65 billion for C.
By contrast, JP Morgan (JPM) has $2.5 trillion in assets, $200 billion of equity and generates almost $100 billion of revenues.
Reflecting operating losses and a toxic asset book (of European loans and sovereign debt), DB trades at only one third of (overstated) shareholders equity compared to Citigroup at 90% of shareholders equity and JP Morgan at 1.8x capital.
If all this wasn't enough, Deutsche Bank has an opaque derivatives book - probably at about $40 trillion with an estimated net exposure of approximately $100 billion.
Based on discussions I have had with bank managements I don't believe (BAC) , C, JPM or (WFC) have much counter party exposure to Deutsche Bank.
Perhaps most important is that Deutsche Bank's financial and operating woes (as well as those of other equally challenged EU banks) and concentration on cost savings instead of business building have and will continue to inure to the benefit of the large U.S. money center banks who stampede towards gains in corporate and retail market share as well as taking share in global fixed income trading. (Those multi function market share gains remind me of the enormous deposit base increases achieved 8-9 years ago via acquisitions of weak banking sisters that positioned the large industry players well today)."
(Citigroup and JP Morgan are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells C or JPM? Learn more now.)
