President Donald Trump’s favorite lender, Deutsche Bank, might be in trouble after years of sketchy business practices.
A recent Bloomberg report explained that after Deutsche Bank AG decided not to take over Commerzbank AG, both companies are searching for alternatives to solve their “pathetic returns.”
Benefits of the merger would not offset “additional execution risks, restructuring costs and capital requirements,” the company decided, according to two Bloomberg opinion columnists. They noted that from the beginning the merger looked like a risky and expensive idea that wouldn’t fix the “structural inefficiencies in German banking.” At the same time, it revealed the trading activities of the bank and sub-par profits from lending.
It’s unclear if most loans were as problematic as Trump’s, but the president was caught using grossly inflated appraisals for his properties to put up as collateral. In one case, Trump claimed his building was ten stories taller than it actually was, something the bank’s assessor could have verified by looking up at the building. In another, Trump grossly embellished the size of his winery.
In most cases, bank employees would be sent to verify the claims, but if that happened in this case, it wasn’t reflected in Trump’s financial documents. If other major customers got the same treatment, it could explain the company’s problem with anemic profits.
“After multiple attempts at a reboot in recent years, Deutsche Bank will probably need to do the next stage of the restructuring on its own,” Bloomberg reported.
Huge job cuts (as high as 30,000 employees) added to the fears chief regulators had about the merger.
“While Germany may have full employment, and job losses in finance may attract less sympathy than other industries, the deal couldn’t work without unions on board and they were vigorously opposed at both banks,” the report explained.
Meanwhile, back in the United States, Deutsche Bank is dealing with subpoenas for one of their biggest clients.