It takes 16 Deutsche Banks to make one JPMorgan

Recalling former glories.
Recalling former glories.
Image: Reuters/Kai Pfaffenbach
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Deutsche Bank can’t catch a break.

Yesterday, the Federal Reserve said the US division of the German bank failed its latest stress tests, designed to see how well banks can withstand a financial crisis. The central bank said (pdf) Deutsche Bank suffered from “widespread and critical deficiencies across the firm’s capital planning practices,” and there were concerns whether the bank could effectively determine its future capital needs. The Fed rejected its plan to transfer cash from the US subsidiary to its Frankfurt headquarters. The US arm had about $133 billion in assets, as of March.

Deutsche Bank was once a titan of global, and especially European, banking, but now it’s a shadow of its former self. The decline is most clearly seen when you look at the diverging fortunes of Deutsche Bank, Germany’s largest lender, to JPMorgan, America’s biggest bank.

JPMorgan’s market value ($360 billion) is now nearly 16 times the size of Deutsche Bank’s ($22 billion)…

…even though the US banking giant’s assets are only 1.5 times larger than Deutsche Bank’s.

Despite Deutsche Bank’s aggressive (but belated) restructuring, S&P recently cut its credit rating. The huge difference in its market value and its asset base suggests that traders aren’t optimistic about the German bank’s ability to create value on the same scale as its rivals.

For edit: Germany’s biggest bank is worth the same as a medium-sized regional US lender