"Deutsche Bank" shares "sunk" - investors are panic selling, Scholz is trying to calm them down


Shares in Germany's biggest bank, Deutsche Bank, lost much of their value today as default insurance costs rose sharply, as the German lender became the target of panic selling on concerns about the stability of Europe's banking sector. the media reported.

Many analysts are at a loss as to why the bank, which has made ten consecutive quarters of profits and has a strong capital and solvency position, has become a target in a market that appears to be in seek-and-destroy mode.

The emergency rescue of Credit Suisse by UBS, following the collapse of the US Silicon Valley bank, has caused concern among investors, which was deepened by the further tightening of monetary policy by the US Federal Reserve on Wednesday, writes "CNBC".

Central banks and regulators had hoped the Credit Suisse bailout deal brokered by Swiss authorities would help calm investor jitters about the stability of European banks.

But the collapse of the 167-year-old Swiss institution and a change in creditor hierarchy rules to wipe out Credit Suisse's 16 billion Swiss francs ($17,4 billion) in additional bonds have left the market unconvinced that the deal is enough to keep them the stresses in the sector.

In recent years, Deutsche Bank has undergone a multibillion-euro restructuring in order to cut costs and increase profitability. The lender posted annual net income of 5 billion euros ($5,4 billion) in 2022, up 159% year-on-year.

Its CET1 ratio – a measure of a bank's solvency – was 13,4% at the end of 2022, while its liquidity coverage ratio was 142% and its net stable funding ratio was 119%. These figures would not mean that there is cause for concern about the bank's solvency or liquidity position.

The German Chancellor Olaf Scholz told a news conference in Brussels on Friday that Deutsche Bank had "thoroughly reorganized and modernized its business model and is a very profitable bank", adding that there was no basis for speculation about its future.

Some of the concerns surrounding Deutsche Bank have centered on its exposure to US commercial real estate and its significant derivatives.

However, research firm Autonomous, a subsidiary of AllianceBernstein, on Friday dismissed these concerns as "well known" and "just not very dire", pointing to the bank's "strong capital and liquidity position".

"Our underperform rating on the stock is simply driven by our view that there are more attractive stock stories elsewhere in the sector (ie, relative value)," said in a research note, Autonomous Research strategists Stuart Graham and Leona Lee.

"We have no concerns about Deutsche's viability or asset value. Let's be crystal clear – Deutsche is NOT the next Credit Suisse," they say.

Unlike the troubled Swiss lender, they noted that Deutsche Bank is "solidly profitable" and Autonomous projects a return on tangible book value of 7,1% for 2023, rising to 8,5% by 2025.

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