Deutsche Bank stocks closed down by 8.5% on the Frankfurt Stock Exchange
Deutsche Bank, Germany’s largest, stocks closed sharply lower Friday by 8.5% as the rising cost of insuring against default risk raised concerns about the resilience of European banks.
The stock closed at a loss of 8.53%, settling at 8.54 Euros, after losing as much as 14% during the day, in the third consecutive session of declines on the Frankfurt Stock Exchange.
Its competitor Commerzbank lost 5.45%, down to 8.88 Euros.
Several European banks also closed lower, sending European stock markets lower.
On Thursday, the cost of insuring against debt default rose for most European banks, especially for Deutsche Bank, in what is a sign of a lack of market confidence in the banking sector, which in Europe and the United States witnessed two weeks of severe turmoil with the bankruptcy of Silicon Valley Bank in California (SVB) and then Two other US regional banks, in addition to the rescue of Credit Suisse through its acquisition by UBS.
“Although the problems that led to the bankruptcy of SVB have nothing to do with Deutsche Bank, investors are selling their shares in Deutsche Bank out of fear,” said Jochen Stanzel, analyst at CMC Market.
Andreas Lipko, an independent analyst, said that “fears of a possible liquidity crisis remain latent”.
He also sold some of the AT1 bonds issued by Deutsche Bank, which are debt instruments similar to capital, which led to an increase in their returns.
AT1 bonds issued by banks have generally come under pressure since Credit Suisse was forced to write down $17 billion of these securities as part of its forced takeover last weekend.
“Judging by movements in CDS, AT1 Bonds and Deutsche Bank’s share price, investors are worried about the bank’s health,” analyst Stuart Graham at Autonomous wrote Friday.
Nevertheless, Graham said, “I’ve no concerns about the viability of Germany’s largest banks, thanks to its strong liquidity reserves, but to be clear, Deutsche Bank isn’t next Credit Suisse,” he concluded.
On Friday, German Chancellor Olaf Scholz was keen to reassure the markets, saying that there was no reason to worry about Deutsche Bank, following a European summit in Brussels.
