Global Markets

Deutsche Bank Shares Topple: Is the Next Banking Debacle on the Cards?

Story Highlights

The shares of Deutsche Bank started falling last week due to a panic sell-off among investors.

As the banking sector remains under a tight grip globally, the shares of the German banking giant, Deutsche Bank AG (DE:DBK), fell by more than 8% on Friday. The shares were even down by 14% during the day. Overall, the shares are down 21% over the last month.

Europe’s Stoxx 600 ended 1.4% lower on Friday, led by the banking sector.  

Being among the leading lenders in Europe, Deutsche Bank was hit hard due to the ongoing turmoil in the sector. It was triggered after the price for its credit default swaps (CDS) shot up, which raised concerns over the bank’s overall financial health. This increase indicates a higher cost of insuring the bonds against any risk of default.

The panic reminded the markets of another episode like the collapse of Credit Suisse Group AG (NYSE:CS) earlier this month, which was later rescued by UBS Group (NYSE:UBS).

Many European leaders assured investors that the Euro banks are in good health based on their strong balance sheets and liquidity positions. Olaf Scholz, the German Chancellor, commented, “The Deutsche Bank is a profitable business with no reasons for concern.”

Starting this week on a positive note, European stocks opened higher, led by banks soaring 1.7%. Deutsche Bank’s stock gained 4.3% in early trading on Monday.

Another banking player from Germany, Commerzbank AG (DE:CBK), opened higher and is trading up by 2.8% at the time of writing. Commerzbank closed with a decline of 5.5% on Friday.

France’s leading financial services company, Societe Generale SA (DE:SGE), opened in the green zone after losing around 7.7% in the last week.

Analysts remain upbeat on DBK and don’t think of it as the next Credit Suisse. In its 2022 earnings, the bank posted a 15% jump in its profits before tax of €5.6 billion, which were its highest since 2007. The liquidity coverage ratio was 142%, above the mandatory level of 100% as of December 2022.

Experts feel that with strong solvency ratios, liquidity positions, and back-to-back profitable quarters, there are remote chances for the bank to go down.


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