What do you get when you merge German zombie Deutsche Bank and zombie Commerzbank? An ogre zombie bank!
Or as Billy Preston almost sang, “Nothing Plus Nothing Equals Nothing.”
Both Deutsche Bank and Commerzbank are trading at under $10 or 10 Euros per share. This is down from over $100 per share for Deutsche Bank in the 2000s and Commerzbank was trading at over 200 Euros as well. How the once mighty have fallen.
Earning per share for Deutsche Bank have plummeted despite efforts to revamp their business model.
The same goes for Commerzbank.
While Commerzbank hasn’t issued any contingent collateral (CoCo) bonds, Deutsche Bank has issued 4 CoCo bonds. Here is the 6% CoCo bond. The good news? Both CDS and the yield to maturity (YTM) have been declining in 2019, likely reflecting the expected merger of the two.
The downside? Merging two large zombie banks creates an “Ogre Zombie” bank. One that the ECB and German government cannot permit to fail.
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