Also before this weekend there was strong turbulence on the stock exchanges. Deutsche Bank lost around 14 percent at its peak, and its competitor Commerzbank lost up to almost nine percent. “It’s now affecting the entire banking sector,” says equity expert Stefan Müller from the German Society for Securities Analysis. “They are put in a sack indiscriminately.” The European banking index Stoxx 600 Banks fell by 2.5 percent, not a single bank title was able to save itself in the plus zone this Friday. “Some apparently don’t want to be caught on the wrong foot over the weekend,” says rating expert Guido Versont from the rating agency Independent Credit View.
One possible reason: the cost of contingency insurance had increased. If investors wanted to insure themselves against a bond default at Deutsche Bank, they had to pay significantly more for it in the past few days. In order to secure an investment amount of ten million euros, only around 140,000 euros were needed in the middle of the week, but by Friday afternoon it was already more than 200,000 euros. Many stock investors also took this as a panic signal: Is something up in the bush at Deutsche Bank?
However, the problem seemed to lie more in the credit default swap market, where only about 20 major banks even quote such swaps. If, in the event of unrest in the banking sector, many large investors suddenly hedge themselves more, this will be met with a structurally far too small supply. “But that says little about the actual condition of a bank,” says banking expert Versont.
Scholz: “No need to worry”
According to Chancellor Olaf Scholz, Deutsche Bank’s collapse is no cause for concern. “There is no reason to worry about anything,” Scholz said on Friday after an EU summit in Brussels. “Deutsche Bank has fundamentally modernized and reorganized its business model and is a very profitable bank,” said the SPD politician when asked whether Deutsche Bank would be the next Credit Suisse.
Stock market experts assessed the situation of Deutsche Bank on Friday as stable, but strategically weak. In business with private customers, savings banks, Volksbanks and ING-Bank are being followed, according to Frankfurt. The bank no longer plays a leading role in international business. Bank boss Christian Sewing only recently achieved his return target of eight percent because a special tax effect played into his hands. “The price loss now is not a compliment for the bank’s strategy,” says equity expert Stefan Müller. “However, one should not draw conclusions about the fundamental situation of the bank from the fall in share prices.”
At the same time, Deutsche Bank is not considered a good role model for every stockbroker in terms of business strategy. “Unlike other major banks, Deutsche Bank and Credit Suisse have continued global investment banking. Although Deutsche Bank has managed to return to profitability since 2020, the financial markets are now asking themselves: After Credit Suisse, who is the next weak major bank? that gets into trouble,” says banking expert Dieter Hein from the analysis company Fairesearch. “And here Deutsche Bank is at the forefront, because the business model is not seen as sustainably profitable,” says Hein.
Another unrest factor: Many companies are currently shifting their account deposits to different banks. Last week, companies and investors were estimated to have shifted around 100 billion US dollars from accounts to so-called money market funds. They also offer a small return, are considered relatively safe, but are not formally bank accounts. For private depositors in Germany there is a statutory deposit insurance of up to 100,000 euros per person and bank, private banks promise to protect even more.