Following a succession of worldwide bank collapses this month, anxieties in the financial industry continue to spread, which has caused shares of Deutsche Bank, the largest lender in Germany, to begin plunging last Friday.
In the meantime, default insurance rates for a possible bank failure have hit four-year highs.
On Friday, shares of Deutsche Bank (DBK) dropped from 9.06 EUR to 8.25 EUR, a loss of 11% for the day and 26% from the previous month. Along with the bank’s drop, nearby European banks’ equities also fell, notably Commerzbank (-5.6%) and Societe Generale (-6.48%).
Once the price of Deutsche Bank’s five-year Credit Default Swaps started to soar on Friday above 220 basis points, the decline started to pick up speed (bps). S&P Global Market Intelligence reports that this is its highest level since late 2018 and is up from 142 bps just two days earlier.
Despite the company’s financial reports showing 10 consecutive quarters of profit, rising CDS costs reveal concern among investors about the health of the bank. In 2022, the bank earned an after-tax profit of $5.7 billion EUR.
The Federal Reserve had to bail out the bank’s depositors as part of a “systemic risk exception” shortly after Silicon Valley Bank (SVB) collapsed earlier this month, sparking fears. Soon after Credit Suisse was acquired by UBS in a $3.25 billion merger rescue deal earlier this week, panic swept across the Atlantic and seized it.
S&P reports that just before Credit Suisse’s bailout, the company’s CDS swaps jumped to 1,194 bps, which is much higher than Deutsche’s current level.
Jim Cramer, a financial analyst for CNBC, claimed on Friday that Deutsche Bank is performing “great”.