Deutsche Bank is the latest financial institution to face significant pressure in March 2023, as its share price has fallen around 25% over the past month as of Friday, March 24. The harsh spotlight on Germany’s largest bank comes as the cost to insure the bank’s debt against default spiked to multi-year highs on Friday, March 24.
According to data from Refinitiv, the price of the bank’s credit default swaps – a type of insurance for bondholders – had its largest one-day spike on record on Thursday, March 23, but was still far below levels of the previous global financial crisis.
The global banking industry has been in turmoil since U.S.-based Silicon Valley Bank failed on March 10. The ripple effect traveled across the pond to Europe, leading to an emergency government-orchestrated buyout of Switzerland’s second-largest bank, Credit Suisse.
On March 19, UBS Group agreed to buy its struggling rival in a deal worth $3.25 billion. Credit Suisse has faced its share of troubles for years, but the stunning end to the 166-year-old institution continued to shake markets, as evidenced by Deutsche Bank’s latest troubles.
“Deutsche Bank is one from a global standpoint that has had trouble for years that you could almost put in a similar category, meaning they’ve just had problem after problem like Credit Suisse has,” a former Credit Suisse director Hal Lambert said Monday, March 20. “So I don’t know whether they have a risk of liquidity problem right now or not. But they’re certainly under a lot of pressure.”
That pressure came to fruition as Deutsche Bank saw $3 billion in market value wiped away in a week. But German Chancellor Olaf Scholz insisted Friday, March 24 the financial system is stable.
“Deutsche Bank has thoroughly reorganized and modernized its business model and is a very profitable bank. There is no reason for concern whatsoever,” Scholz said.
Deutsche Bank began a restructuring process in 2019 to reduce costs and improve profitability.
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