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European Bank Stress Test Joke: This Insolvent Euro-Bank and Group of Central Bankers Met at a Bar and…

|Includes: BBVA, Deutsche Bank AG (DB), SAN

This post will outline the second bank stress test joke of the day with the first one detailed in “European Bank Investors, Don’t Look Now – You’ve Been Hoodwinked, BamBoozled…“. According to the MSM news outlets, Germany’s PostBank, along with practically every other German bank except clearly insolvent and near defunct HyPo have passed the stress tests. So have French top banks, Portuguese, Italian, Finnish and Swedish banks. What? You’re not laughing yet? You  know how we feel about the Spanish banks, so I will not go there right now (but will leave a trail of links at the bottom of this post for the uninitiated). What we are going to do now is focus on the farce that is passing Germany’s Post Bank, a clearly insolvent (1.4x over insolvent) institution whose only potential (and that’s just a potential) saving grace is the possibility of a forced takeover by a larger bank.

Let’s revisit a few pages from the professional subscriber document, file icon Deutsche Bank vs Postbank Review & Summary Analysis – Pro & Institutional (subscribers can follow along on pages 3, 4, and 5):

Now, I know this Texas stuff is for Yankees, but there is some credibility to it. If one were to strip out the intangibles of PostBank an compare it to practically any measure that has to due with collateral value (most assuredly padded), impaired assets, or loss allowances, this banks is INSOLVENT! No, I didn’t say in need of a nominal amount of capital, I said I-N-S-O-L-V-E-N-T!!! Get the point yet? But it can pass a European stress test though! It gets worse. Using the Eyles test shows that its shortfall as a % of tangible equity is 175%! Whaaaatttt???!!!! The banks is insolvent, nearly twice! I can go on, but if you haven’t got the picture yet, you are either a European bank regulator or you will never get the point. For those that are curious re: the other metrics, read on… Over half of their holdings are junk!

Not only did the European tests not find Post Bank insolvent, they declared it didn’t even need any capital. Why the European markets don’t tank due to this f@#$%ing farce is beyond me. The aggregate results of the test and methodology can be found in this 55 pages document. Below you can find related BoomBustBlog European bank research.

Subscription research (Click here to subscribe)

Actionable Intelligence Note For All Paying Subscribers on European Bank Research
File Icon A Review of the Spanish Banks from a Sovereign Risk Perspective – retail.pdf

File Icon A Review of the Spanish Banks from a Sovereign Risk Perspective – professional

File Icon Ireland public finances projections

File Icon Spain public finances projections_033010

File Icon Banks exposed to Central and Eastern Europe

File Icon Greek Banking Fundamental Tear Sheet

File Icon Italian Banking Macro-Fundamental Discussion Note
File Icon Spanish Banking Macro Discussion Note

Interested parties can read the entire 50+ article Pan-European Sovereign Debt Crisis series by clicking here.



Disclosure: short european banks