The stock price of Deutsche Bank, Germany’s largest bank, plunged more than 8% on the 24th (local time) as the global financial crisis also landed in Germany. After the financial crisis from the U.S. spread to Switzerland, it even landed in Germany.
◇ CDS Surges, Shares Plunge 8%: Deutsche Bank’s stock price plunged on the same day because credit default swap (CDS) prices soared to a five-year high.
There are risks such as bankruptcy and default in loans and bond investments. CDS refers to derivatives in which other investors compensate for these losses instead
Deutsche Bank’s CDS jumped to 2.20% from 1.42% just two days ago. This is the highest since 2018. As the CDS soared, Deutsche Bank’s stock price plunged 8.53% from the previous trading day to 8.54 euros on the German stock market.
As a result, Deutsche Bank’s stock price plunged 20% this month to a five-month low. The bank’s market capitalization has evaporated by 3 billion euros in just a week due to the recent plunge in stock prices.
◇ European stock markets plunged more than 1% in unison: European stock markets also plunged as Deutsche Bank’s stock price plunged.
On the same day, the European stock market plunged 1.66% for Germany’s Dax, 1.26% for Britain’s FTSE, and 1.74% for France’s Cag. As a result, the pan-European STOXX 600 fell 1.37%.
Shares of rival UBS, Societe General, Barclays and BNP Paribas all plunged as Deutsche Bank’s shares plunged. As a result, the European Bank Index plunged 3.8%.
“The Deutsche Bank crisis will be limited”
However, some predict that the crisis will be limited because Deutsche Bank is a blue-chip bank.
Unlike Credit Suisse (CS) of Switzerland, which recently went bankrupt, Deutsche Bank is a very healthy bank, and the crisis will be limited, CNBC, an economic media outlet, reported on the same day.
Deutsche Bank recently underwent a multi-billion euro restructuring. As a result, it has been in the black for the last 10 consecutive quarters, and its annual net profit in 2022 increased by 159% year-on-year to 5 billion euros.
Many experts point out, “It is excessive for Deutsche Bank, which has recorded a surplus for 10 consecutive quarters and boasts strong capital and payment capabilities.”
German Chancellor Olaf Scholz also dismissed the possibility of spreading the crisis at a press conference in Brussels, saying, “Deutsche Bank is a very healthy bank.”
