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Deutsche Bank heads new rout for banking stocks on financial markets

Germany’s largest bank is now the center of a new wave in selling across financial stocks and banking, less than one week after Credit Suisse was forced to takeover.

Deutsche Bank shares dropped more than 14% during volatile trading Europe-wide. However, they were down around 8% in late trading.

The so-called credit default swap rates at the bank were almost up to a fifth.

This is a significant increase in the cost of insurance against default.


France’s major banks also experienced share price drops. Commerzbank was around 5% lower heading towards the close. Societe Generale and BNP Paribas suffered similar declines, around 5% and 6 respectively.

The US saw shares also suffer, with First Republic Bank, a regional bank in trouble, initially dropping 4% shortly after opening. However, it was later reduced to 1%.

Banks listed in London were also not spared from pain.

After the collapse of Silicon Valley Bank, the US, markets have been volatile for several weeks.

Fears over the effects of rising interest rates upon banks’ bond holdings have since taken a significant scalp in Credit Suisse. This is Switzerland’s second-largest Bank.

Regulators forced it to takeover larger rival UBS before the financial markets opened on Monday.

A new focus only emerged on Friday.

Chris Beauchamp is chief market analyst at IG. He stated: “We are still on edge, waiting for another domino, and Deutsche clearly is the next one in everyone’s mind (fairly, or unfairly).

“It looks like the banking crisis is still not over.”

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Five-point guide to the bank panic of 2023

European banking stocks fell across the board, with the German DAX nearly 2% lower in late trading.

Deutsche Bank has 7,000 employees in London, where the FTSE 100 was 1.26% higher at the end of the day.

Barclays closed 4.2% lower than the previous day, while NatWest and HSBC finished with declines respectively of 3.6%, 2.6%, and 2.4%.

Fears that the banking crisis would reduce credit availability and thus economic growth will lead to wider economy stocks, such as energy shares and mining, falling.

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Both the government and Bank of England have previously tried to reassure investors that there is no threat to the UK’s banking system, as the financial strength of UK lenders is much higher than their European counterparts and levels prior to the financial crisis.

HSBC has also spoken out in support.

It stated that it was not concerned about liquidity issues at UK banks as they have high levels of central bank reserves. Therefore, the statement said that UK banks shouldn’t need sell their bond portfolios in order to meet deposit outflows.

Susannah Streeter is the head of money and market at Hargreaves Lansdown. She said that just as there were hopes that contagion could be contained, banks stocks in Europe are being battered by fears that new problems might be lurking…

“Waves of bad news continue to hit the banking sector, and it doesn’t seem like the tide is set to turn anytime soon.”

She added that the European Central Bank was ready to increase liquidity if necessary and pointed out that the Bank of England is also firm in its belief that there is no systemic risk.


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