Deutsche Bank just lost R22 billion on a trade gone bad involving Warren Buffett
- Deutsche Bank lost $1.6 billion on an investment in a portfolio of municipal bonds and related derivatives, according to the Wall Street Journal.
- In 2007, the bank bought a $108.4 billion portfolio of municipal bonds, the report said. The following year, Deutsche purchased default protection from Berkshire Hathaway.
- After almost a decade of the deal, Deutsche Bank offloaded the bonds in 2016, incurring $1.6 billion in losses, the report said.
Deutsche Bank lost $1.6 billion (about R22.2 billion) on an investment in which it purchased prior to the 2008 financial crisis, according to a report from Wall Street Journal.
In 2007, the bank bought a $7.8 billion (roughly R108.4 billion) portfolio of municipal bonds. A year later, the German lender purchased default protection from Berkshire Hathaway for the investment, paying $140 million (R1.9 billion) up front for the transaction.
Internally, Deutsche Bank's executives had debated over the valuation of the bonds after the purchase, the report said. Financial auditors from KPMG also questioned whether the bank has set aside sufficient funds to cover potential losses, however, the bank shrugged off those concerns, according to the report.
Deutsche Bank eventually decided to offload the bonds and related derivatives nine years after the purchase.
"This transaction was unwound in 2016 as part of the closure of our Non-Core Operations" unit, a bank spokesman told the Journal in an email. "External lawyers and auditors reviewed the transaction and confirmed it was in line with accounting standards and practices."
Executives at Deutsche Bank never decided to restate its financial statements to include the losses before an internal investigation closed last year, the report said.
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