Deutsche Bank: Bank Loser
The broad U.S. stock indexes all pulled back 1% as investors continued to worry over the fiscal cliff, with Speaker of the House John Boehner (R-Ohio) saying during a press conference that President Obama was not taking a balanced approach in his negotiations with republicans over tax increases and spending cuts to lower the federal budget deficit.
Boehner said the president was "far more focused on tax hikes than spending cuts," and that "the president wants to pretend spending isn't a problem. That's why we don't have an agreement."
KBW Bank Index (I:BKX) was down 1% to close at 49.42, with all but five of the 24 index components seeing declines.
The major news in the banking world on Thursday was the agreement between European finance ministers on the Single Supervisory Mechanism (SSM), for a unified banking regulator that would facilitate coming eurozone bailouts of troubled banks.
The European Central Bank will begin its supervisory role in March, with national parliaments deciding on whether or not to submit the new unified bank regulator. .
ECB president Mario Draghi said in a statement that unanimous agreement among members of the European Union's Economic and Financial Affairs Council marked "an important step towards a stable economic and monetary union, and towards further European integration." The agreement will also pave the way for eurozone nations to bail out troubled banks.
German chancellor Angela Merkel said before the Bundestag on Thursday that the significance of the agreement for the SSM "could not possibly be overestimated," according to a Deutsche Welle report.
Merkel also said she was looking for further agreements before the end of the European Leaders' summit in Brussels on Friday, including "concrete measures today and tomorrow that focus on how we can achieve this increase in competitiveness."
Deutsche Bank on Thursday announced that it had completed the formation of a new Non-Core Operations Unit (NCOU), which was first announced in September as part of the company's "Strategy 2015+" initiative to shore up capital and cut expenses and bring the company's Basel III core Tier 1 ratio above 10% by 2015.
The company's strategy is reminiscent of former Citigroup (C) CEO Vikram Pandit's "good bank/bad bank" strategy of placing noncore assets within the City Holdings subsidiary, and selling assets from there or allowing them to run off. This strategy was accelerated last week along with other major initiatives to cut expenses , by new Citigroup CEO Michael Corbat.
Deutsche Bank said that "assets identified for the NCOU segment (as per 30 September 2012) totaled EUR 122 billion, with a pro-forma Basel 3 risk-weighted asset (RWA) equivalent of EUR 125 billion."