The failure of SVB and Signature Bank has now affected Germany’s largest bank.
Deutsche Bank (DB) stock is falling as the biggest German bank is the latest financial institution to be affected by the bankruptcy of Silicon Valley Bank and Signature Bank in the United States.
The decline was spurred by a surge in demand for Deutsche Bank’s five-year credit default swaps, which operate as insurance in the event that the bank fails on its payments. Today, prices reached their highest level since January 2018 at one point.
German Chancellor Olaf Scholz attempted to allay fears by stating, “There is no cause for alarm.” In addition, he said that Deutsche Bank has fundamentally updated and reformed its business model and “is a highly lucrative bank.”
Volatility Is Not Unexpected
German Central Bank President Joachim Nagel has said that the current share price volatility in the banking industry is not unexpected. He did, however, say that authorities are prepared for the possibility of more financial turbulence.
As of 11 a.m. E.T., Deutsche Bank stock was down 7%; since Silicon Valley Bank and Signature Bank collapsed, Deutsche Bank stock had down by 19%.
Citigroup Analysts
Despite the present financial crisis, Citi analysts believe Deutsche Bank’s fundamentals remain strong. Citi also pointed to the bank’s solid liquidity and capital flows as reasons for its 10 straight quarters of profitability. Nonetheless, it is not immune to controversy.
A mere four years ago, Deutsche Bank’s shares reached an all-time low as the company faced a barrage of scandals, including allegations of money laundering Russian funds, breaking U.S. sanctions, and spying on journalists and shareholders it saw as threats. After taking over as CEO in 2018, Christian Sewing has effectively reduced wasteful spending and increased the bank’s capital flows, which were bolstered by a surge in investment banking activity during the epidemic.