Deutsche Bank shares plunge in renewed bout of stress
DEUTSCHE Bank has become the latest focus of the banking turmoil in Europe, as ongoing concern about the industry sent its shares slumping the most in three years; the cost of insuring against default also rose.
The bank, which staged a recovery in recent years after a series of crises, said on Friday (Mar 24) that it will redeem a Tier 2 subordinated bond early. Such moves are usually intended to give investors confidence in the strength of a company’s balance sheet, though the share price reaction suggests the message is not getting through.
“It is a clear case of the market selling first and asking questions later,” said Paul de la Baume, senior market strategist at FlowBank. “Traders do not have the risk appetite to hold positions through the weekend, given the banking risk and what happened last week with Credit Suisse and regulators.”
Deutsche Bank slumped as much as 15 per cent, the biggest decline since the early days of the Covid-19 pandemic, in March 2020. It was the worst performer in an index of European bank stocks, which fell as much as 5.7 per cent. Crosstown rival Commerzbank, Spain’s Banco de Sabadell and France’s Societe Generale also fell steeply.
The widespread declines undermine hopes among authorities that the rescue of Credit Suisse Group last weekend would stabilise the broader sector. Central banks from the Federal Reserve to the Bank of England this week raised interest rates once again, keeping their focus on taming inflation amid hopes that the worst of the financial turmoil was past.
All week, regulators and company executives sought to reassure traders about the health of the banking industry. Deutsche Bank management board member Fabrizio Campelli said on Thursday that the government-brokered takeover of Credit Suisse by UBS is “no indication” of the state of European banks.
Standard Chartered chief executive Bill Winters said on Friday that while there are still some issues to be addressed, “it seems that the acute phase of the crisis is done”.
The latest moves in Europe follow losses in US banks, which tumbled on Thursday even after Treasury Secretary Janet Yellen told lawmakers that regulators would be prepared for further steps to protect deposits if needed. BLOOMBERG
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