• Shares in Deutsche Bank, Germany’s largest lender, began to fall on Friday as part of a global banking panic.
• The cost of default insurance on the bank’s potential collapse has risen to four-year highs.
• Financial results show that the bank had 10 consecutive quarters of profit and reaped $5.7 billion EUR on after-tax profit in 2022.
Deutsche Bank Shares Plunge
Deutsche Bank (DBK) shares fell from 9.06 EUR to 8.25 EUR on Friday – an 11% decline on the day, and 26% descent from a month prior. The bank’s slide was coupled by declines in neighboring European bank stocks, including Commerzbank (-5.6%) and Societe Generale (-6.48%).
Default Insurance Soars
The price of Deutsche Bank’s five-year Credit Default Swaps began surging on Friday above 220 basis points (bps). That’s up from 142 bps just two days prior, and its highest point since late 2018, according to S&P Global Market Intelligence. Soaring CDS costs indicate fear among investors about the bank’s stability despite the firm’s financial results showing 10 consecutive quarters of profit and a total after-tax profit of $5.7 billion EUR in 2022.
Banking Panic Spreads
The recent banking panic follows the collapse of Silicon Valley Bank (SVB) earlier this month prompting the Federal Reserve to bail out the bank’s depositors as part of a “systemic risk exception” shortly afterward. Panic soon crossed the Atlantic with fears surrounding other banks such as Credit Suisse falling last week causing further instability in Europe’s financial sector.
Is Deutsche Bank Next?
As Europe’s largest lender continues its descent investors are left asking whether or not Germany’s largest bank will be next to fail? However despite investor concerns financial results show that Deutsche Banks is still profitable with 10 consecutive quarters under their belt so far this year indicating that it may be too early to call for its failure yet still leaving room for speculation amongst concerned parties nonetheless.
Conclusion
Overall while Deutsche Banks shares continue to plunge with default insurance soaring at four year highs questions remain over its future performance especially with further banking panics continuing across Europe leaving investors wondering if it will be next to go under or manage stay afloat for now at least until further news arrives regarding its performance going forward into 2021 and beyond