Bloomberg reported Friday that, according to unnamed 'people familiar with the matter', a New York trading desk run by Deutsche Bank credit-trader Boaz Weinstein has suffered a $1bn trading loss. And the final loss may end up even larger as the German bank unwinds the positions.
Cynics point out that news of the trading loss leaked on the day that attention was focused on Bernard Madoff and that alleged $50bn trading fraud. (What's another $1bn loss over at Deutsche compared to that ?)
Weinstein and his team are said to have been running a 'basis trade' that, according to The Wall Street Journal, 'included buying large amounts of corporate bonds, and at the same time hedging those bets by buying credit-default swaps'. The newspaper says that, as investors ditched corporate bonds, Deutsche's corporate-bond portfolio fell more in value than the CDS hedges gained, leading to the losses. Weinstein's group have, however, made billions for the bank in the past.
Credit Suisse and Keefe, Bruyette & Woods have both now cut their stock price and earnings estimates on Deutsche. Most commentators now expect the German bank to post a fourth-quarter loss.
And Reuters reports that Bank of America (BofA) has denied speculation that it is about to off-load some of its stock in China Construction Bank in order to raise capital. Many market commentators feel, however, that it is only a matter of time. BofA owns a 19.13% stake in the Chinese bank.
Bloomberg reports that Macquarie is thought to be close to announcing a joint venture with Hengtai Securities, which will give the Australian bank exposure to China's $70bn equity and debt underwriting market. The news agency also reports that Macquarie has made an offer for Citigroup's Australian operations.
Finally, Financial News reports that compensation over at asset management firms is likely to halve over the next year. Base salaries are unlikely to increase, and bonuses are certain to fall dramatically. The good news, however, is that there will probably be fewer job cuts (on a percentage basis) that that seen at many of the world's commercial / investment banks.