Deutsche Bank lost $1.6 billion on a single bond investment in 2016 involving insurance from Warren Buffet's Berkshire Hathaway, according to a recent report by the WSJ.
The loss will go down as one of the worst trades in the banking industry in the past decade. For comparison's sake, the loss is almost four times the amount of profit Deutsche Bank made in all of 2018.
What may be more concerning is that the bank chose not to adjust the diminishing value of these assets on their public records for years, which could have misled potential investors. During this same period, the bank raised billions of dollars in capital markets. Investors were told internal financial controls were sound and were never made aware of the valuation discrepancies. The bank said they were in line with accounting standards and practices; however, this is not the first time Deutsche Bank has been accused of mis-marking illiquid holdings.
This particular transaction, and how mangers debated internally for years on how to handle it, sheds some light on why the bank has had trouble competing in the U.S.
Never shy of controversy, news broke earlier this month that the bank is reneging on $4 billion worth of consumer relief promises — an arranged settlement for selling bad mortgages pre-crisis — and instead re-purposing the funds towards originating new loans.