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Shares of the German bank have fallen for the third day in a row, losing more than a fifth of their value so far this month, amid investor fears of a possible bankruptcy that European authorities dismiss.
Shares of Germany’s biggest bank, Deutsche Bank, fell on investor speculation that regulators and central banks are still out of control of the worst shock to the sector since the 2008 global financial crisis.
The euro fell against the dollar, yields on euro zone government bonds plunged and the costs of insuring against bank defaults rose, all despite assurances from policymakers that the global banking system is safe.
Deutsche Bank was in the crosshairs of investors and plummeted 8.5%. The index of the main European banks also fell 3.8%. “The market is wary, or tired, to put it that way, that more problems have arisen,” said Joseph Trevisani, an analyst at FXstreet.com.
“It takes time. It will take weeks without problems in the banking system for the markets to be convinced that it is not a systemic problem.”
Research firm Autonomous clarified that Deutsche is “not the next Credit Suisse,” while JPMorgan analysts wrote that “we are not concerned” and that Deutsche’s fundamentals were “strong.”
Paul van der Westhuizen, a senior strategist at Rabobank, cited Deutsche’s profitability as the “fundamental difference” between the two European banks, given that Credit Suisse, which had to be sold to UBS, had no prospects for profitability by 2023.
“It is a very profitable bank. There is no reason to worry,” German Chancellor Olaf Scholz reiterated during his meeting with other leaders in Brussels.
The movement that shook the markets
Despite this, shares of the largest German bank have lost a fifth of their value so far this month and the cost of its five-year CDS, a form of insurance for bondholders, jumped this month. Friday to its highest level in four years, according to data from S&P Market Intelligence.
Deutsche Bank’s stock plunged after the bank announced plans to redeem $1.5 billion of subordinated debt on May 24, before it matures in 2028. The bank affirmed that it has “all the required regulatory approvals” for this decision, but it caused an impact in the banking sector that dragged down the European stock markets in the day.
Deutsche Bank specified that it will repay the bonds at one hundred percent of their nominal value “with interest accrued up to the amortization date.”
“As usual, we do not speak out on specific companies and even less on the financial markets,” according to German government spokesman Nodjinan Nimindé-Dundadengar.
With EFE and Reuters
