NEW YORK: Banking stocks fell again on Friday, with shares in German giant Deutsche Bank knocked by worries that regulators and central banks have not yet contained the worst shock to the sector since the 2008 global financial crisis.
Wider indicators of financial market stress were also flashing, with the euro falling against the dollar, Euro zone government bond yields sinking and the costs of insuring against bank defaults surging despite efforts by policymakers worldwide to reassure investors.
The index of top European bank shares fell 3.8%, with Deutsche Bank slumping 8.5% alongside a sharp jump in the cost of insuring its bonds against the risk of default.
Bank shares slide despite Credit Suisse buyout
On Wall Street, big banks fared less poorly, with JPMorgan Chase & Co, Citigroup and Wells Fargo & Co down around 2% each.
The S&P 500 regional banks index recovered 0.9%, trimming its loss in March to 38%. First Republic Bank was near unchanged, while PacWest Bancorp climbed almost 4%.
Some of the top analysts that cover the banking industry stressed on Friday the differences between Credit Suisse AG , the Swiss bank that needed a rescue, and Deutsche Bank. JPMorgan wrote in a research note, “We are not concerned” and said Deutsche’s fundamentals were “solid”.
Paul van der Westhuizen, senior strategist at Rabobank, cited Deutsche’s profitability as the “fundamental difference” between the two European banks, given Credit Suisse did not have a profitable outlook for 2023. “It’s a very profitable bank. There’s no reason to worry,” German Chancellor Olaf Scholz also said. Deutsche Bank declined to comment.
Shares in Germany’s largest bank have lost a fifth of their value so far this month and the cost of its five-year credit default swaps (CDS) - a form of insurance for bondholders - jumped to a four-year high on Friday, based on data from S&P Market Intelligence.
Short sellers have made a profit of over $100 million on paper betting against Deutsche Bank stock over the last two weeks, financial data company Ortex said on Friday.
European banks’ Additional Tier 1 (AT1) debt - a $275 billion market that was thrust into the investor spotlight during the rescue of Credit Suisse - also came under further selling pressure.