On Friday, the shares of Deutsche Bank and other European banks fell, as investors grew concerned about the stability of the global banking sector.
Deutsche Bank’s shares dropped almost 15% on March 24, their lowest level in five months, wiping off $3 billion from the bank’s value in just one week. The drop followed an increase in the cost of ensuring the bank’s debt against the risk of default, with Deutsche’s credit default swaps reaching over 220 basis points, the highest since late 2018.
The shares of other leading European banks, including Commerzbank, Societe Generale, and Banco de Sabadell, also saw steep declines on Friday.
The latest negative development in Europe follows a selloff in U.S. banks on Thursday, amid turmoil among regional lenders. This year’s troubles started with bank collapses in the U.S., including those of Silvergate Bank and Silicon Valley Bank.
European financial authorities have been assuring that banks are better capitalized and regulated now than before the beginning of the previous global financial crisis. Despite this, concerns remain among investors about the state of the banking industry on both sides of the Atlantic.
Deutsche Bank has been in the spotlight after the government-supported takeover of Credit Suisse by rival UBS. Both groups are now under scrutiny in connection with a U.S. Justice Department probe into whether bankers helped Russian oligarchs evade Western sanctions.
The Stoxx 600 index of European banks, not including Credit Suisse or UBS, was down over 5%, nearing a monthly decline of almost 20% after one of its most volatile weeks of trading over the past year.
German Chancellor Olaf Scholz rejected comparisons between Deutsche Bank and Credit Suisse, stating that Deutsche Bank has fundamentally modernized and reorganized its business and is a very profitable bank. He assured investors that there is no reason to be concerned about Deutsche Bank’s stability.
However, the recent drop in Deutsche Bank’s shares highlights ongoing investor worries about the state of the global banking sector.