Chinanews.com, March 3 (Zhongxin Finance, Peng Jingru) The banking crisis in Europe and the United States has not been smoothed out and has risen again and again, following Silicon Valley Bank and Credit Suisse, Deutsche Bank (hereinafter referred to as "Deutsche Bank") has been put on the cusp.
Deutsche Bank's share price fell sharply, and the official voice was urgent
"Market confidence has not fully recovered, and there is still a lack of trust in the official expression of confidence in stabilizing the market." Li Yong, deputy director of the Expert Committee of the China Institute of International Trade, believes that Deutsche Bank's various connections with the US financial market, its connection with Credit Suisse, and its past problems have become the reason for the market to stir, and the surge in the CDS price has become the trigger point for the decline in stock prices.
Screenshot of Deutsche Bank's website.
Deutsche Bank's credit default swap (CDS) insurance costs soared on the last trading day of last week, similar to what happened before Credit Suisse announced the merger, and concerns about the US and European banking sectors intensified. On Friday, Deutsche Bank European shares fell 15% intraday, the biggest intraday decline in three years, and closed down to 3%, but the share price still hit a nearly five-month low. The market is beginning to see that Deutsche Bank will be the next vulnerable link in the European banking crisis.
Immediately afterwards, European government officials urgently endorsed Deutsche Bank, and German Chancellor Scholz said that Deutsche Bank was "profitable" and worry-free after fundamentally modernizing and restructuring its business model in 2019. ECB President Christine Lagarde told EU leaders that the eurozone banking sector remains strong under a strong regulatory regime and will inject liquidity at any time if necessary.
As of Friday's U.S. stock close, Deutsche Bank closed down 3.11%. However, sentiment in European markets warmed up heading into Monday's trading session, with Deutsche Bank shares closing higher.
Next Credit Suisse? Deutsche Bank had net revenues of around €50 billion last year
Yang Delong, chief economist and fund manager of Qianhai Open Source Fund, said Credit Suisse's problems have raised investor concerns about other European banks, which is why Deutsche Bank may be the next Credit Suisse forecast. However, from the perspective of capital strength, Deutsche Bank is much stronger than Credit Suisse, and the possibility of bankruptcy is not great.
"From the current data, it is unlikely that Deutsche Bank will follow in Credit Suisse." IMF analyst Zhao Yueshu said that Deutsche Bank's financial position and solvency are relatively strong, with a net income of up to 2022 billion euros in 50, a CET1 ratio of 13.4%, a liquidity coverage ratio of 142%, and a net stable funding ratio of 119%.
Screenshot of Credit Suisse's website.
"Compared with Credit Suisse, Deutsche Bank's CDS, although it soared last week, is still lower than Credit Suisse's CDS at 220, compared to more than 700 CDS before Credit Suisse's collapse. In addition, Deutsche Bank is a Global System Significant Bank (GSIB) one level above Credit Suisse in the G20 Banking Stability Association, and the German government will certainly not sit idly by before the crisis. Zhao Yueshu said.
Zhao Yueshu also said that Deutsche Bank has gradually improved its profitability and market credibility through multiple restructurings in the past few years. After several consecutive quarters of surpluses, 2022 was marked by record profits. In addition, official German support for Deutsche Bank and confidence in its future also helped stabilize the market. Although confidence issues could lead to a loss of funds, the ECB is likely to take countermeasures to ensure the stability of Deutsche Bank.
Why is it still sung down when the situation is better?
"There are some black spots in Deutsche Bank's historical record." Zhao Yueshu said that especially before the financial crisis, the US government was fined up to $140 billion for improper sale of subprime mortgage securities. This forced Deutsche Bank to make urgent adjustments and restructurings.
Deutsche Bank has been fined for money laundering and manipulating financial markets. According to German media reports in April 2022, the Deutsche Bank headquarters building was searched by German police on suspicion of involvement in money laundering.
In 2021, Deutsche Bank was fined €866.<> million by the German Federal Financial Supervisory Authority (BaFin) for allegedly manipulating the Euro Interbank Offered Rate (Euribor).
As early as 2008, Deutsche Bank and other banks were fined $5.25 billion by US and British regulatory authorities for allegedly conspiring to manipulate the London Interbank Offered Rate (Libor) and other profits of at least <> million euros, the highest fine in the industry at the time.
Li Yong said that investors' concern that Deutsche Bank will become Credit Suisse No. 2 is mainly caused by the continuation of the panic after the collapse of Silicon Valley Bank and Credit Suisse Bank, and is also related to the market's interpretation and judgment of Deutsche Bank's portfolio risks.
Zhao Yueshu also believes that the recent decline in Deutsche Bank's share price is mainly due to market confidence problems. As a result of the Credit Suisse incident, the government forced a write-down of AT1 replenishment capital, and the market panicked about AT1 capital products, which in turn led to a decline in market confidence. (End)