Monday, May 20, 2024

Deutsche Bank shares fell 9% after a sudden rise in insurance costs against default


Banking crisis

It has lost more than a fifth of its value this month

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Shares fell more than 9% in early trade on Friday after Thursday night’s surge in loan defaults, as concerns about the stability of European banks persisted.

Shares in the German lender fell for a third day in a row and have lost more than a fifth of their value so far this month.

Two sources: “UPS” is racing against time to close the “Credit Suisse” deal in late April

Credit default swaps — a form of insurance for a company’s bondholders — rose to 173 basis points on Thursday night from 142 basis points late on Thursday.

Deutsche Bank’s Additional Tier 1 Notes (COCO) or AT1 — the asset class that made headlines this week after Credit Suisse’s controversial downgrade of AT1 notes as part of a bailout deal — sold off sharply.

Deutsche Bank has posted 10 consecutive quarters of profits after completing a multibillion-euro restructuring that began in 2019 aimed at cutting costs and improving profitability. The bank announced annual net income of 5 billion euros ($5.4 billion) in 2022, up 159% from the previous year.

The CET1 ratio – a measure of bank solvency – stood at 13.4% at the end of 2022, while the liquidity coverage ratio stood at 142% and the net fixed funding ratio at 119%.

Financial regulators and governments have taken steps in recent weeks to curb contagion risk from problems affecting private lenders, and Moody’s said in a note on Wednesday that they should be “broadly successful” in doing so, according to a report published by the US. The network I watched was “CNBC”.

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“However, in an uncertain economic environment and with investor confidence still weak, there is a risk that policymakers will not be able to contain the current turmoil without long-term and potentially severe consequences both inside and outside the banking sector,” Moody’s said. .

“Even before the pressures on banks emerged, we expected global credit conditions to weaken in 2023, resulting in very high interest rates and lower growth, including recessions in some countries.”

As central banks continue their efforts to curb inflation, long-term financial conditions remain tight, Moody’s suggested, adding that there is a greater risk of “pressures spreading outside the banking sector, causing greater financial and economic damage.”

In a related context, banking stocks fell again on Friday after a turbulent week in light of investor concerns that the sector’s worst problems since the 2008 financial crisis have not yet been contained.

An index of major European banks fell 2.2% in early trade, while Swiss bank UBS fell 6.4%.

UBS rushed to take over Credit Suisse on Sunday after the collapse of two U.S. banks this month sparked turmoil in the sector, after the ailing Swiss bank lost investor confidence.

Swiss authorities and UBS are racing to complete the acquisition within a month in an effort to retain Credit Suisse clients and employees, according to two people familiar with the matter.

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Nadia Barnett
Nadia Barnett
"Award-winning beer geek. Extreme coffeeaholic. Introvert. Avid travel specialist. Hipster-friendly communicator."

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