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This is the skinny on those French and German banks that are at significant risk to PIIGS drowning, or potentially even getting significantly wet. The sell side banks have released reports on which bank is exposed to Greece, etc., but we decided to take it a few steps farther in order to create a truly actionable document that our subscribers can actually use to base concrete decisions upon. As is customary, I am releasing snippets of the proprietary research for free to the blogoshpere. This time around, I'll feature a European bank that we feel is thoroughly insolvent, yet trading at one of the highest premiums in all of Europe! As excepted from the reports referenced below:

Deutsche Postbank

The bank reported its exposure to sovereign debt of Greece, Italy, Ireland, Portugal and Spain at €1.3 billion, €4.7 billion, €350 million, €50 million and €1.2 billion.

Applying the loss rates under the base case, the total estimated losses on sovereign debt holdings is €1.7 billion (60.1% of tangible equity) on the total European sovereign debt exposure of nearly €24.9 billion (based on the reported sovereign debt exposure of December 2009). The existing Texas ratio of the bank is 139%, and if we include the losses on sovereign debt (unconventional, but illustrates solvency in a clearer fashion), the Texas ratio* will be 177%. The bank is trading at price to tangible book value of 1.83x. The stock is trading on a high multiple largely owing to speculation of full takeover by Deutsche bank. The float is 36% of shares outstanding as 39.5% is owned by Deutsche Post and 25% is owned by Deutsche Bank. See Deutsche Bank vs Postbank Review & Summary Analysis - Pro & Institutional and Deutsche Bank vs Postbank Review & Summary Analysis - Retail for a detailed overview and analysis of the unusual Deutsche Postbank situation.