So, Ritchie can’t read accounts then either

DeutscheBank is looking to be in serious financial trouble. When a bank admits it is having to write off the value of investments it rarely states the full extent of the problem on the first occasion when it does so. There is speculation that without serious capital injection DeutscheBank may not meet regulatory requirements. No wonder dividends have been cancelled.

In the article he himself refers to:

Most of the writedown is on goodwill, which does not affect its capital position. Deutsche Bank said its core capital ratio stood at about 11 percent at the end of September, compared with 11.4 percent at the end of June.

Sigh.

And as to not admitting on first try:

Deutsche Bank’s (DBKGn.DE) new boss John Cryan

That’s absolutely what new bosses do, stick the kitchen sink in the write offs.

25 thoughts on “So, Ritchie can’t read accounts then either”

  1. He’s now turned into a Zerohedge like Cassandra style doom and gloom merchant based on his two posts today – ‘It’s all going to fall apart’.

    It’s hilarious – I can actually picture him with his fists balled up, churning out blogposts laden with typos and even more grammatically bizarre than normal, in frustrated impotence – almost apoplectic that he has been made a national laughing stock. It really is hugely entertaining!

    He did come out with the Gandhi quote exactly as Tim predicted which was even more comical.

    That said, a couple of people have pointed out that I doubt people in Germany in the 1920s who laughed at the NSDAP (That’s National Savings and Deposits Scheme, eh, Murphy?) were laughing at them a decade later so whilst he’s down for now we need to ensure he stays down…..

  2. To be fair to the new CEO at Deutsche, to have goodwill still on the books from an acquisition sixteen years ago seems a bit excessive, so a writedown is probably the right thing to do. The BT operations should be fully integrated into the rest of DB by now and I doubt that there are many assets or people from BT that are still in DB. Any synergy from the acquisition should have been realised years ago and more of the profits in past years should have been offset by a writedown of the exceess of the price paid over book value.

  3. Surely the problem is not so much that he can’t read accounts but simply that he can’t read?

  4. Oh come on! The man is 57 years old and has the knowledge and experience to know that another market crash is on the way. In his lonely shed, he is building a grand new theory of economics which will ensure that the world will survive. He is waiting for his country’s call.

    It is tragic that the world is laughing at him. Truly tragic.

    In fact I am going to burn a photo of him on 5 November.

  5. I am hoping to move to a new house and buy myself a nice shed to work from home in. Worked for him.

  6. ‘almost apoplectic that he has been made a national laughing stock’

    I would place a fairly large wager that that is not how he sees himself.

    He has a paper thin skin when it comes to criticism, but the hide of a rhino when it comes to self deception.

  7. Actually Tim, I think his comments on Deutsche Bank show that he has no understanding of the corporate world and nor does his commentariat. From what I have read, the new CEO is simply getting the bad news out of the way. You only have one chance to make write offs and be thanked for doing so by the markets. I suppose advising luvvies on their taxes is not the best way of learning how the business world operates. In his new professorial role, however, maybe he will spend some time looking at the real world rather than dreaming up shed-bound fantasy worlds.

  8. In his new professorial role, however, maybe he will spend some time looking at the real world rather than dreaming up shed-bound fantasy worlds.

    Beware when you stare in to the abyss. Sometimes the abyss stares back.

  9. Bloke not in Cymru

    When I’ve tried to question him about the more complex aspects of corporate accounting (especially multi-currency/international subsidiaries) it’s clear he has no real knowledge of either working in that area or even the relevant accounting standards. When I questioned him about criticism of IFRS and what standards he used to prepare accounts for his clients he said they had changed a lot since he last used them. Given that he still claims to have a few clients then the only way he can be ignorant of current standards and still practicing means he’s working at a very low level.
    As for his claim that the loss must be worse than they are saying then he really is forgetting accounting 101, losses bring recognised at earliest possible point, they will have used some value calculation/rationale for the write down which had been reviewed by indepenent auditors. That’s not to say that the loss couldn’t be higher, but it does represent a reasonable estimate with the given information at this time. To suggest otherwise and claim it is deliberate is surely a libel agaisnt a group of his fellow accounting professionals.

  10. BniC

    “To suggest otherwise and claim it is deliberate is surely a libel agaisnt a group of his fellow accounting professionals.”

    I’ve never had the impression – either by his actions or through his words – that he really gets too concerned about his ‘fellow’ professionals?

  11. @ Alex
    There are rules in IFRS about checking the “value” of “Goodwill” every year, so if the “Cash-Generating-Unit” is forecast to generate lots of future income, so that the dcf present value of profits it will generate exceeds the “Goodwill” you are supposed to leave it in the Balance Sheet. One way round this for new CEOs is to increase the discount rate.

  12. @ BNiC
    He has an excuse for not knowing IFRS – it is only compulsory for quoted companies and some other PLCs. It is his ignorance of UK GAAP that appals me.

  13. Deutsche Bank is selling both Postbank and its stake in Hua Xia Bank. We’ve known for years that these two were overvalued. It’s probably better to write down the goodwill now and take the P&L hit than wait until they’ve both been sold at what would have to be a massive discount to book value. A[part from anything else, it sends a clear message that the new CEO is intent on sorting out the bank’s long-standing problems.

    RM doesn’t understand that goodwill doesn’t count towards CET1 capital.

  14. Bloke not in Cymru

    Admittedly he has an excuse for not knowing them well, doesn’t seem to stop him pontificating, though admittedly this applies to more than just IFRS in his case.
    That said his knowledge of general principles is certainly odd, not sure I would sleep soundly if he was doing my books

  15. @John77
    I appreciate that. My point is that BT and DB must be so integrated now that it is impossible to see the join and any notion of a separate unit is only in the minds of management.

  16. @ Alex
    True, but the auditors and the accounting standards committees don’t care about that.
    In many cases the acquired business can still be viewed as a separate unit and the synergy benefits that were the raison d’etre of the purchase boost either the acquired CGU or the original business depending on the choice of transfer price: usually they split them fairly equally until a new CEO decides to rewrite the the transfer price in favour of his immediately former division.

  17. @John77 As I recall the BT acquisition by DB, BT had committed a felony and were thus unable to transact with many US institutions, so the purchase by DB was a godsend, but all of the assets and people were stripped out of the tainted US banking company and put into the corresponding businesses of DB. Since BT was essentially a New York commercial bank (during the Glass-Steagall era) that had sold its retail businesses, pretty much all of its business (apart from the recently acquired Alex, Brown business) was in the main banking company (and its few overseas branches). How they could claim to have separate units when there were ex-DB and ex-BT traders sitting side by side on the trading floor is beyond me.

  18. Even if they can longer separate buisness units there will likely be assets/contracts still in existence that will need to be reviewed and may have an impact of goodwill

  19. @ Alex
    I was discussing the generality, not the specific example in the case of Deutsche (I’m not supposed to look at Deutsche). Howevber I can easily see that the accountants would treat segments where the ex-BT traders dominated as being BT and those where Deutsche traders dominated as being non-BT. Accountants don’t do the sort of intellectual rigour that irritates my wife.

  20. Worzel

    I agree he’s unlikely to see himself in that way but I have no doubt his blocking button on Twitter will have had to work overtime and the comments filter on TRUK will have been turned up to the max.

    However, the PM chose to mention him – no comments policy, no block button to santise the message – 64 positions in the book – all wrong (I have read his first missive – waiting on the second to be given as a gift and though I doubt Cameron has read it odds are most of the 64, if not all will be completely wrong based on the Courageous State ) – he is utterly unable to control the information flow and made to look ridiculous in the eyes of many. For someone with that big an ego and who has control freak tendencies that has to hurt!

    Rob

    I agree it might be tricky for someone that preternaturally think-skinned to get a mass movement behind him but he should not be underestimated – he is certainly tenacious and has the stubbornness that is often a notable characteristic of rank stupidity and total ignorance – of anything.

  21. His response to Frances’ comment in today’s related post is appalling. Patronising, ignorant and rude – “people with more experience than you….”

    And Ritchie’s banking experience is?

    Later on, he makes the comment “Shall we look at fundamentals here and not the froth? That’s what I am quite good at”.

    No, it’s not. It’s really, really not.

  22. I suppose he thinks that if he foretells doom twice a day, sooner or later he will be right and he will be hailed as a prophet. On the other hand, people might regard him as another Ambrose EP, who has been proclaiming the end of the world every week since at least 2003.

  23. GlenDorran

    I’d sooner put my faith in horoscopes than anything that buffoon has to say – his comment to Frances Coppola was a disgrace but frankly does one expect anything else?

    Diogenes

    AEP at least sounds as though he knows something. Murphy is just little more than a vaguely educated pub bore…

  24. @BniCymru
    “Even if they can longer separate buisness units there will likely be assets/contracts still in existence that will need to be reviewed and may have an impact of goodwill”

    Not bloody likely. BT bankers had the attention between than of a gadfly and a gnat. Most of their business was in short term trading and derivatives and outside project finance they would have held much paper over 5 years. Their PF paper would have mostly been securitised/syndicated and the residual amount outstanding after 16 years would be neglible and probably zero. S&P last rated BT issued debt in 2007 which isabout probably when it was all repaid.

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