Deutsche Bank shares have lost a fifth of their value so far in March and its credit default swaps increased on Thursday.
“Deutsche Bank has been in the spotlight for a while now, much like Credit Suisse has been,” he told Reuters Stuart Cole, chief macroeconomist at Equiti Capital.
“It has gone through several restructurings and leadership changes in an attempt to get back to a strong position, but so far none of these efforts seem to have really worked.”
Deutsche Bank has not responded to requests for information.
“We’re still on edge waiting for another domino to fall, and Deutsche is clearly next on everyone’s minds (fairly or unfairly),” said Chris Beauchamp, IG’s chief markets analyst.
The falls in European bank stocks follow Thursday’s losses in the United States, where investors are watching how far authorities will go to prop up the sector, especially fragile regional banks.
For the fourth time in a week, US Treasury Secretary Janet Yellen spoke to reassure Americans about the safety of the US banking system.
The global banking sector has been rocked since the sudden failure this month of two regional US banks sparked fears of contagion to other banks.
Policy makers have stressed that the turmoil is different from the global financial crisis of 15 years ago, saying that banks are better capitalized and funds are easier to raise.
However, concerns have spread rapidly and UBS on Sunday rushed to take over Swiss competitor Credit Suisse after the troubled bank lost investor confidence.
Swiss authorities and UBS are rushing to close the acquisition within a month, according to two sources familiar with the plans, to try to retain Credit Suisse customers and employees.
Investment bank Jefferies cut its recommendation on UBS shares from “buy” to “hold”, saying the acquisition of its former rival would change UBS’s equity story, which was based on a lower risk profile, an organic growth approach and high returns on capital.
“All of these items, which is what UBS shareholders bought, have been gone, probably for years,” he said.
The Credit Suisse acquisition has also raised broader concerns about investor exposure to a fragile banking sector. The decision to prioritize shareholders over additional tier 1 (AT1) bondholders rocked the $275 billion worth of AT1 bond market.
AT1 convertible bonds were designed to be used during bailouts in order to avoid the costs of bailouts being passed on to taxpayers.
As part of the deal, the Swiss regulator determined that Credit Suisse’s AT1 bonds, with a notional value of $17 billion, would be written down to zero, a decision that surprised global credit markets.
Bill Winters, chief executive of Standard Chartered STAN.L, said Friday that zeroing these bonds had “profound” implications for global banking regulation.
He also told a financial forum in Hong Kong that the US Federal Reserve’s move to guarantee uninsured deposits constituted “moral hazard.”
With information from Reuters
