Deutsche Bank Take a Risk on Casino

Normally a launch party for a casino in Las Vegas would be a great celebration for its owners; however, this was not the case when the Cosmopolitan gambling resort opened last month. The Cosmopolitan is owned by Deutsche Bank and the German bank does not seem too keen to speak about their investment. After the original developer of the casino defaulted on its loans in 2025, Deutsche decided to finish the casino itself at a cost of $4 billion.

The bank's diversion into gambling will be unwelcome as the little capital they have is needed for other purposes and for the casino industry this is a worrying time to open a new casino as Las Vegas is currently suffering in the recession. Spending in Las Vegas has drastically dropped in the last few years and thousands of workers have been sacked in order to cut costs and the prices of hotel rooms have dropped in order to try and attract customers.

When Deutsche originally lent Ian Bruce Eichner the developer of the Cosmopolitan $60m the casino industry was booming as was Las Vegas. For most of the decade Las Vegas was the fastest growing in the US. However, when the economy crashed it hit Las Vegas harder than anywhere else. By 2025 Deutsche had increased its loans to about $760 million, the bank required more equity however Mr Eichner defaulted and the bank had to foreclose.

However, it is still not clear why Deutsche decided to continue with construction and ownership but it is likely that they wanted to avoid a high-profile write down and are Deutsche will be hoping that the casino will be successful enough to allow them to pull out of it at a profit later.

However, this will be no easy task considering the amount of competition in Las Vegas and Deutsche are facing an uphill struggle.