It does not look good.
Deutsche Bank (Photo: ShutterStock)
After the collapses of Silicon Valley Bank and the fall of Credit Suisse, is one of the largest banks in the world also in danger?
Deutsche Bank shares fell 11 percent today (Friday) on the German DAX exchange following an increase in its risk premium and a jump in CDS contracts, which serve as a kind of insurance for bond holders in the event of default. Such an increase in contracts means a reduction in confidence in the bank's ability to return the its debts. This does not mean that the bank will collapse immediately, but since it is one of the largest banks in terms of loans and since other banks have failed, there is a fear that Deutsche Bank will not be able to raise all the funds it has lent. Yesterday the stock fell by 6 percent and today, as mentioned, it shed another 11 percent after which has already reached a peak of minus 14 percent.
The fall of Credit Suisse, which was bailed out by UBS, and earlier Silicon Valley Bank, made investors more cautious.
Deutsche Bank has reported a profit for ten consecutive quarters since 2019, but in 2022 it lent over $5 billion, a 160 percent jump from 2021.
The drop in the stock led to a statement by German Chancellor Olaf Schulz, who said: "Deutsche Bank is a supervised bank that is managed carefully, it is very profitable."
The sharp fall of Deutsche Bank expresses the fear of the collapse of other banks and led to a red close in the European markets.
Dax fell 1.86 percent, as did Cac in Paris.
In Potsey in London, trading closed with a decrease of 1.42 percent.
On Wall Street only moderate declines are recorded.
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