When Deutsche Bank stunned markets last week with a profit warning, part of the rationale the bank gave was to write down the value of an acquisition of a bank it bought 16 years ago.
MarketWatch reports that Deutsche Bank said it will report a $6.99bn third-quarter net loss that included a write off of the remaining premium paid in 1999 to purchase Bankers Trust, which at the time was a $10.1bn deal.
John Cryan, Deutsche Bank’s Co-CEO, told employees in a message that current assessments of Bankers Trust and Deutsche Postbank, acquired in 2010, 'no longer support the carrying values on our balance sheet'.
When Deutsche Bank bought Bankers Trust in 1999, it paid a huge premium over the fair value of the bank of. Most of this overpayment, called goodwill, has been sitting on the books of Deutsche’s investment banking business waiting to be realized as profits by the unit. The bank says it’s worthless now.
Hit the link below to access the complete MarketWatch article: