Deutsche Bank Stock Drops, Default Insurance Increases as Banking Fears Spread

Shares of Deutsche Bank, the biggest bank in Germany, started to fall on Friday as anxieties in the financial sector continue to spread in the wake of a slew of worldwide bank collapses this month.

Meanwhile, the cost of insurance against a possible bank failure has reached four-year highs. On Friday, shares of Deutsche Bank (DBK) dropped from 9.06 EUR to 8.25 EUR, a fall of 11% on the day and 26% from the previous month.

In addition to Commerzbank (-5.6%) and Societe Generale (-6.4%), neighboring European bank equities also declined. Despite ten straight quarters of profitability, investors are concerned about the bank’s stability, as seen by the escalating CDS premiums.

The bank’s after-tax earnings were EUR 5.8 billion in 2022. S&P said Credit Suisse’s CDS swaps spiked as high as 1,194 basis points just before its rescue, far higher than Deutsche’s current level.

The Fed deemed SVB, with assets just over $200 billion, to be systemically significant enough to rescue its depositors, starkly contrasting the situation with other banks.

However, European authorities have criticized the Fed’s rescue attempt, fearing it threatens the global banking industry’s confidence. If required, Treasury Secretary Janet Yellen said on Thursday that her agency would be ready to take “additional action” to protect American bank accounts.

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