Deutsche Bank (NYSE:DB) shares fell hard on Friday morning following a spike in credit default swaps on Thursday night, as concerns about the stability of European banks persisted.
The German lender’s shares retreated for a third consecutive day and have now lost more than a fifth of their value so far this month. Credit default swaps — a form of insurance for a company’s bondholders against its default — leapt to 173 basis points on Thursday night from 142 basis points the previous day.
The emergency rescue of Credit Suisse (NYSE:CS) by UBS, in the wake of the collapse of U.S.-based Silicon Valley Bank, has triggered contagion concern among investors, which was deepened by further monetary policy tightening from the U.S. Federal Reserve on Wednesday.
Swiss and global regulators and central banks had hoped that the brokering of Credit Suisse’s sale to its domestic rival would help calm the markets, but investors clearly remain unconvinced that the deal will be enough to contain the stress in the banking sector.
Deutsche Bank’s additional tier one (AT1) bonds — an asset class that hit the headlines this week after the controversial writedown of Credit Suisse’s AT1s as part of its rescue deal — also sold off sharply.
Deutsche led broad declines for major European banking stocks on Friday, with German rival Commerzbank shedding 9%, while Credit Suisse, Societe Generale and UBS (NYSE:UBS) each fell by more than 7%.
Barclays and BNP Paribas both dropped by more than 6%.
DB shares docked 61 cents, or 6.3%, to $9.04.
