Deutsche Bank Case Study

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1. Deutsche Bank Business Overview Deutsche Bank (DB) was founded in 1870 on the basis of foreign trade. With the opening of three international branches in Japan, China and the United Kingdom within three years after initial operations. The bank had funded a number of large-scale industrial projects such as the Germany’s electrical engineering industry and the building of the Baghdad Railway from 1903 to 1940. The bank was challenged by inflation, war and other global crisis in the first half of the twentieth century, which saw the bank taking advantage in consolidating and entering many mergers and acquisitions, and expanding its empire, with a recent purchase of Postbank and Xchanging Transaction Bank (XTB). The Bank’s share was listed…show more content…
Why did the Financial Crisis Occurred? The fall of giants in the financial industry such as Lehman Brothers in 2008 almost ruin the global financial system. It has to take taxpayers to bail-out most financial institutions to sustain the industry. The subprime lending business was on the hypothesis that surge in real estate prices was a continuous one, but this hypothesis was proven wrong by the chain retort it caused that surrounded the global financial industry. This was due to the fact that there were some incentives that encouraged risk-taking by the financial institutions such as the reliance on the credit rating by the rating agencies which were funded by the issuers and management compensation which was based on total expansion, revenue and profit rather than risk adjusted profitability (Protiviti International, 2012). There was a systematic problem when subprime loan non-payments started to stress banks and financial institutions balance sheets, there was lack of trust and confidence that absorbed out liquidity from the established financial system, and this exposed the weakness in most financial regulations such as the Basel II (Kumar, Kumar & Rohit, 2012. Pg. 2; Glass, Davidson and Blumberg, 2009: Tully,…show more content…
Deutsche Bank’s Profit and Risk Management Evaluation. Break Down Ratio Analysis per Appendices A - D Return on Assets (ROA) 2013 2014 = Net Income / Total Assets 666/ 1,611 * 100 = 41.34% 1.66 / 1.71* 100 = 97.1% Return on Equity (ROE) = Net Income/Shareholder's Equity 666 /54.72= 12.17% 1.66 / 68.35 = 2.43% Leverage ratio Equity + Reserves - Intangible assets = Tier 1 capital Total assets - Intangible assets = Adjusted assets Leverage Ratio = Tier 1 capital / Adjusted assets Tier 1 Capital = 54.72B + 5.59B - 13.93B = 46.38B Adjusted assets = 1.61T - 13.93B = 12.32T Leverage Ratio for 2013 = 46.38B / 12.32T = 3.378% Leverage Ratio for 2014 = 58.61 / 13.24T = 4.43% Operating Cash Flow Ratio = Net Operating Cash Flow / Current Liabilities Operating Cash Flow Ratio = 1.91B / 178.16B * 100 = 1.72% = 2013 = (3.75B) / 100.61B * 100 = (3.73%) = 2014 Capital Adequacy Ratio (CAR) = Tier One Capital + Tier Two Capital / Risk Weighted Assets CAR = 50,717+ 4,747 / 300,369 = 18.47% for 2014 = 50,483 + 6,532 / 333,605 = 17.1% for 2013 Figure

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