Deutsche Bank shares tumbled on Friday after the cost of insuring the bank’s debt against the risk of default shot to more than four-year highs, highlighting concerns among investors about the stability of Europe’s banks.
The region’s banking sector has had a rough ride in the last week, with a state-backed rescue of Credit Suisse and turmoil among regional US banks fuelling concerns about the health of the global banking sector.
Deutsche shares, which have lost more than a fifth of their value so far this month, fell by as much as 14.9% on Friday to their lowest in five months. The shares were last down 13% at 8.13 euros ($9.16).
Germany’s largest bank has seen $3 billion wiped off its market value in the space of just week.
Deutsche Bank’s credit default swaps (CDS), a form of insurance for bondholders, shot up above 220 basis points (bps) – the most since late 2018, from 142 bps just two days ago, based on data from S&P Market Intelligence.
On Thursday, Deutsche CDS had their largest one-day gain on record, based on Refinitiv data. But they remain well below highs of close to 300 bps logged during the euro zone debt crisis in 2011.
CDS for major European banks rose across the board on Friday, reflecting investors’ reluctance to carry any risk on their portfolios going into the weekend.
“Deutsche Bank has been in the spotlight for a while now, in a similar way to how Credit Suisse had been,” Stuart Cole, Head Macro Economist at Equiti Capital, said.
“It has gone through various restructurings and changes of leadership in attempts to get it back on a solid footing but so far none of these efforts appear to have really worked.”
Published in The Express Tribune, March 25th, 2023.
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