The weekend is almost here, and another Bank seems to have some troubles again. Silicon Valley Bank collapsed a few weeks ago, and then Credit Suisse followed.
Today Deutsche Bank Shares are down about 8% and 26% in total for the month. Experts say we do not need to worry and panic- But is it really the tip of the Ice Berg?
So now we have news about Deutsche Bank, Germany's largest bank. Their shares have fallen because people worry about the bank's stability. The cost to insure bondholders against default is also rising rapidly, which is not good news.
This is happening because there are concerns about the stability of European banks, and the emergency rescue of Credit Suisse has made investors worried.
Other major European banking stocks, like Commerzbank, Credit Suisse, Societe Generale, UBS, Barclays, and BNP Paribas, have also fallen because of this. Deutsche Bank has been profitable for 10 straight quarters, and its solvency and liquidity position seems to be good. However, there is still a risk that policymakers may be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector.
German Chancellor Olaf Scholz reassured the public that there was "no reason to be concerned" about Deutsche Bank, which he described as a "very profitable bank."
EU leaders in Brussels also issued a joint statement, describing the European banking system as "resilient, with strong capital and liquidity positions."
However, market nerves are still high after the collapse of two large US banks last week, which sparked a broad response from the US government to prevent further bank panics. Swiss banks UBS and Credit Suisse are also facing turmoil, with UBS acquiring its smaller rival Credit Suisse for 3 billion Swiss francs to avoid further market-shaking turmoil in global banking.
Deutsche Bank and other European banks have been affected by rising rates and the increasing price of insuring CDS senior debt. Last week, the European Central Bank continued its plan to hike interest rates by half a percentage point. At the same time, the Bank of England raised its main interest rate by a quarter of a percentage point after data showed a surprise spike in inflation last month.
However, some investors may have been rattled by Deutsche Bank's announcement on Friday that it would pay back one of its bonds five years before its maturity date.
While investors would usually interpret such a move as a sign that a company is in good financial health and can pay back its creditors early, some investors may have interpreted the announcement as a sign that Deutsche Bank is nervous about the state of the banking sector and trying to overcompensate.
Experts often say we do not need to worry or panic yet, but the question remains are we really going to see the biggest collapse in history? What are your thoughts on this?
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