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LONDON: Deutsche Bank shares tumbled on Friday after the bank’s credit default swaps that insure against default shot to a four-year high, highlighting concerns among investors about the overall stability of Europe’s banks.
European banks have 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 last 9.1% on Friday to just shy of Monday’s five-month lows. The shares were last down 8.7% at 8.525 euros ($9.16).
Deutsche Bank’s credit default swaps (CDS) – a form of insurance for bondholders – shot up above 200 basis points (bps) – the most since early 2019 – 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.
“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.”
Deutsche Bank declined to comment when contacted by Reuters.
German finance industry regulator BaFin had no comment.
Some of Deutsche Bank’s bonds meanwhile sold off too. Its 7.5% Additional Tier-1 dollar bonds fell nearly 3 cents to 72.868 cents on the dollar, pushing the yield up to 24%. . That yield is more than double what it was just two weeks ago, based on Tradeweb data.
AT1s issued by banks have come under pressure since Credit Suisse was forced to write down $17 billion of its AT1s as part of a forced takeover by UBS at the weekend.
“The fallout from the wipe out of AT1 bonds in the CS rescue has raised questions about a key part of bank funding, which makes the problems DB has been facing that much more difficult to overcome,” Cole said.
The STOXX 600 index of European banks – which does not include shares of Credit Suisse or UBS – has seen one of its most volatile weeks of trading in a year. The index was last down 2.1%, heading for a monthly decline of 17%.
Separately, Deutsche Bank said it would redeem $1.5 billion in a set of tier 2 notes due in 2028. The bank had already issued similar new notes in February, which were designed to replace the notes that the bank is now redeeming.
European banks have 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 last 9.1% on Friday to just shy of Monday’s five-month lows. The shares were last down 8.7% at 8.525 euros ($9.16).
Deutsche Bank’s credit default swaps (CDS) – a form of insurance for bondholders – shot up above 200 basis points (bps) – the most since early 2019 – 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.
“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.”
Deutsche Bank declined to comment when contacted by Reuters.
German finance industry regulator BaFin had no comment.
Some of Deutsche Bank’s bonds meanwhile sold off too. Its 7.5% Additional Tier-1 dollar bonds fell nearly 3 cents to 72.868 cents on the dollar, pushing the yield up to 24%. . That yield is more than double what it was just two weeks ago, based on Tradeweb data.
AT1s issued by banks have come under pressure since Credit Suisse was forced to write down $17 billion of its AT1s as part of a forced takeover by UBS at the weekend.
“The fallout from the wipe out of AT1 bonds in the CS rescue has raised questions about a key part of bank funding, which makes the problems DB has been facing that much more difficult to overcome,” Cole said.
The STOXX 600 index of European banks – which does not include shares of Credit Suisse or UBS – has seen one of its most volatile weeks of trading in a year. The index was last down 2.1%, heading for a monthly decline of 17%.
Separately, Deutsche Bank said it would redeem $1.5 billion in a set of tier 2 notes due in 2028. The bank had already issued similar new notes in February, which were designed to replace the notes that the bank is now redeeming.
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