So here we go again with another banking crisis in the Eurozone. How many times have we heard this phrase over the last few years. This latest disruption is coming from Portuguese bank Banco Espirito Santo, the second largest in the nation. This is just a few years removed from the country itself requiring a bailout from the EU, as it received a 78-billion euros in rescue funds in May 2011. So how have all these bailouts affected one of Europe’s largest banks, Deutsche Bank AG (USA) (NYSE:DB)?
In May of 2007 the share price of Deutsche Bank AG (USA) (NYSE:DB) hit a record high of $159.76. It took a nose dive along with other banks and equity markets around the globe, as the “containable” sub-prime crisis could not be contained. Deutsche Bank’s share price bottomed out in Jan 2009 at a price of $21.13, declining a gut-wrenching 86%! However, after making that low, shares of the German bank were able to move up an amazing 300% to $84.93, on a snap back rally. Since that time the stock price of Deutsche Bank AG (USA) (NYSE:DB) has gone sideways to lower, while Germany’s DAX Index (Frankfurt Stock Exchange) has ascended to new all time highs, just like the U.S. markets.
So why this huge under performance? I attribute it to all the bailouts needed over the years for Greece, Ireland, Portugal, Spain and Cyprus. Deutsche Bank AG (USA) (NYSE:DB) is one of the largest lenders in Europe and its exposure to such weak countries is immense. The EU has slowly grown its members to close to 30 countries. However, the countries that are joining are not economic powerhouses of any sort. Take a look at the list of nations who required bailouts and you will see that they have given up their weak currencies to adopt a much stronger one in the Euro. By doing so they are not doing their GDP any favors, as their exports will get hurt with a far superior currency by adopting the Euro. The chart of Deutsche Bank AG (USA) (NYSE:DB) is telling us all we need to know about how adding more weak nations to the EU will not do this stock any favors to the upside.