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Deutsche Bank : Commerzbank Deal May Rest on a Mountain of 'Badwill'
German banking giant Deutsche Bank AG will likely depend on an obscure but valuable accounting quirk to make a deal for smaller rival Commerzbank AG workable.
Deutsche Bank has told investors and others close to the bank that it hopes European Central Bank supervisors will allow wide latitude to use the accounting treatment – known as negative goodwill, or "badwill" – as part of a takeover, people familiar with the talks said.
The two banks have been in formal talks since March over a potential merger, spurred on by the German government. There is no guarantee a deal will happen. Both banks are viewed skeptically by investors and trade at deep discounts to their book value, reflecting poor profits and lingering doubts about the quality of some assets.
(and much lying)
A combined bank could recognize a onetime profit of more than EUR16 billion, or more than $18 billion, using badwill, according to analyst estimates. That profit would be crucial for maintaining the combined entity's capital ratios, which regulators are likely to increase as a condition of approving a deal.
The badwill number could vary greatly depending on the valuation paid for Commerzbank. It could also shrink if Deutsche Bank, after it executes a deal, decides Commerzbank's assets are worth less than their current book value. The less badwill that is generated, the more fresh capital from shareholders could be needed.
Deutsche Bank shareholders, who since 2008 have injected more than EUR30 billion of capital into the bank, are resistant to put in much more. Even with a hefty badwill gain, the combined bank will need fresh cash to lay off employees and close unwanted operations. Asset disposals – such as selling Deutsche Bank's asset management arm DWS, or Commerzbank's Polish operations known as mBank – could also be used to raise cash.
"This is not free money that can be used to fund restructuring costs or clean up the balance sheet or return to shareholders," Jeremy Sigee, analyst at Exane BNP Paribas, wrote in a recent note. "Every penny of it is needed to keep the regulatory capital ratios where they started."
Badwill lets buyers book a profit if they buy a target for less than net-asset value, or book value, which is the difference between a firm's assets and liabilities. If a target company is sold for less than its stated book value, then the buyer can treat the difference as a gain.
https://www.marketscreener.com/DEUTSCHE-BANK-AG-56358396/news/Deutsche-Bank-Commerzbank-Deal-May-Rest-on-a-Mountain-of-Badwill-28421338/
In other words DB has lied about the value of it's asset's for a very long time (see mark-to-model vs mark-to-market) and completing this transaction will force both of these bank's to come clean about it.
It's not called 'Badwill' for nothing. If your friend sells you a car for less than the asking price do you get to take the difference in the price (money you saved) and call it income?
Same thing going on here.
was also the primary reason why there was never an official bank failure during the '08 crash-IndyMac is the only real one and that was treated "special", munchkins knows all about it. Using this strategy the FDIC basically arranged shotgun wedding's almost every friday during that time period. Affectionately known as BFF or bank failure friday's-except they were never actually failed.
same here fren. Not touching that one today.
The also tried it to a certain extent with operation twist. Trying to force the long end upwards as the original programs failed to accomplish it.
During visit to crippled Fukushima No. 1 plant, Abe gets updated about ongoing reconstruction work
FUKUSHIMA - Prime Minister Shinzo Abe toured the crippled Fukushima No. 1 nuclear power plant complex and nearby areas on Sunday to check on progress in reconstruction following the 2011 crisis.
His visit came after Olympics minister Yoshitaka Sakurada stepped down last week when remarks he made were deemed offensive to people affected by the March 2011 earthquake and tsunami, which also triggered one of world’s worst nuclear disasters.
“The government will do its utmost to rebuild (this area), engraving in our heart once again that each minister is in charge of reconstruction,” Abe said following his visit to the disaster-hit nuclear complex, his first since September 2013.
Abe said he confirmed “steady progress” in the decommissioning work at the plant that suffered core meltdowns in three of its reactors but noted that “many challenges” remain.
“The state will continue to stand at the forefront of the decommissioning work and the containment of radioactive water (that is accumulating at the plant),” he said.
Earlier in the day, Abe attended a ceremony to open a new town hall in Okuma, one of the two municipalities hosting the nuclear plant, and visited a soccer facility from which the Japan leg of the Tokyo Olympic torch relay will start in March 2020.
Abe said he wants to visit again to see the first torchbearer start the relay.
The J-Village facility, which was used as an operational base for dealing with the nuclear crisis, will fully reopen on Saturday.
The government lifted its mandatory evacuation order just last Wednesday over parts of Okuma.
The new town hall, however, is in a different area from where the original town hall was located in what was once Okuma’s center, as that part remains a no-go zone.
At the opening ceremony, Okuma Mayor Toshitsuna Watanabe said, “The new government building is at the forefront of the town’s revival, and it’s a symbol of the pledge to realize our reconstruction.”
The new town hall will start providing services on May 7.
But in the parts of Okuma where the evacuation order has been lifted — which cover 40 percent of the town’s total land area — only 367 people, or around 3.5 percent of the original population of 10,341, had registered as residents as of late March.
With people in parts of the Tohoku region still struggling to return to the lives they led before the disasters hit, Abe effectively sacked Sakurada over his gaffes and apologized to the public for appointing him.
https://www.japantimes.co.jp/news/2019/04/14/national/visit-crippled-fukushima-no-1-plant-abe-gets-updated-ongoing-reconstruction-work/
(always sorry. we're so sorry-one of the funnier aspects of japanese business when they fuck up)
look what habbened when schumer shit talked indymac. That worked out poorly, for note holders and anyone having a mortgage with them at time. That should have had a bigger impact. It did not. It had a small impact but a few day's later it was What?, Who?-Im ok so it's all good. They simply fell back asleep. Will take something like credit cards not working or gas pumps stopping for these people to see anything. But that would not be good for anyone.
Bad-ass MF'er