Germany: Deutsche Bank worries in turn after a fall on the Frankfurt stock exchange

Deutsche Bank is in turn worried after a fall on the Frankfurt stock exchange on Friday, March 24, 2023. © DADO RUVIC / REUTERS

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After SVB and Credit Suisse, it is the largest German bank, Deutsche Bank, which is in turn attacked by the markets. The stock plunged nearly 15% on the Frankfurt Stock Exchange on Friday, March 24, 2023. All European stock market indices followed.

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This is a new blow for the banking sector this Friday, March 24. Since the beginning of the banking crisis more than two weeks ago, Deutsche Bank shares have lost about 30%, or 7 billion euros of volatile market value, recalls our correspondent in Berlin, Nathalie Versieux.

According to traders, it is above all the rapid rise in the price of hedging against bank defaults that has caused concern in the markets.

In Germany, reassuring comments are multiplying. Financial experts, who believe that Deutsche Bank is able to resist. This bank posted its best profit in 2022 years in 15, more than doubling compared to 2021. Olaf Scholz assures that there is no reason to worry. "Deutsche Bank has fundamentally modernized its business model and is very profitable," the German chancellor said in Brussels.

Indeed, the bank largely meets the requirements of European regulations: its mandatory capital ratio of 13.4% to risk assets and liquidity above 250 billion euros must offer the resources to face periods of turbulence.

There remains the concern of many investors of a risk of contagion of the crisis of confidence since the turbulence around Credit Suisse.

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A heavy judicial past

Deutsche Bank has long been on the front page of financial newspapers with its repeated scandals, before Credit Suisse stole the show. Deutsche Bank was no longer seen as a weak link in the banking system.

In the early 2000s, Deutsche Bank's unbridled growth took it through several chaotic years grappling with a chain of legal cases: illegal practices, money laundering, rate manipulation. Convictions with heavy fines follow one another. A peak was reached in early 2017 with $ 7.2 billion paid to the United States to settle lawsuits its role in the "subprime" crisis dating from 2007.

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To get by, Deutsche Bank resorted to a reduction of about 7,000 jobs announced in 2018, with a reduction in the wing on the capital markets. Then the announcement in July 2019 of 18,000 job cuts and the abandonment of the lucrative trading of shares for third parties.

In the meantime, talks had been held with a view to a possible merger with the other major German institution Commerzbank, which was also in bad shape and partly owned by the State. But with social anger threatening, the discussions were quickly buried.

The arrival of Christian Sewing at the head of the bank in April 2018 came after the 30% fall in the share since January of this year, as the markets no longer believe in the group's recovery. His profile initially questioned: pure in-house product having started as an apprentice in a branch of the group, was this retail banking professional the right man to straighten the bar in investment banking?

Five years later, the 52-year-old boss is well on his way to succeeding. His mandate, renewed in advance in 2021, runs until 2026. It was also in 2021 that he was appointed chairman of the German private banking lobby, accentuating his base with the country's economic and political world.

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