Deutsche Bank shares see biggest slump in three years amid European banking turmoil 

Steep drops in bank shares undermine hopes among authorities that the rescue of Credit Suisse last weekend would stabilise the broader sector

Deutsche Bank shares have slumped as much as 15% — the biggest decline since March 2020. 

Deutsche Bank has become the latest focus of European banking turmoil as its shares see the biggest slump in three years as the cost of insuring against default increases.

The bank, which has staged a recovery in recent years after a series of crises, said on Friday it would redeem a tier-two subordinated bond early. Such moves are usually intended to give investors confidence in the strength of the balance sheet, though the share price reaction suggests the message is not getting through.

Deutsche Bank slumped as much as 15%, the biggest decline since the early days of the pandemic in March 2020. It was the worst performer in an index of European bank stocks, which fell as much as 5.7%. 

Crosstown rival Commerzbank AG, Spain’s Banco de Sabadell SA and France’s Societe Generale SA also saw steep drops.

“It is a clear case of the market selling first and asking questions later,” said Paul de la Baume, senior market strategist at FlowBank SA.

“Traders do not have the risk appetite to hold positions through the weekend, given the banking risk and what happened last week with Credit Suisse and regulators.” 

The widespread declines undermine hopes among authorities that the rescue of Credit Suisse last weekend would stabilise the broader sector. Central banks from the Federal Reserve to the Bank of England this week raised interest rates once again, keeping their focus on inflation amid hopes the worst of the financial turmoil was past.

All week, regulators and company executives have sought to reassure traders about the health of the banking industry. Deutsche Bank management board member Fabrizio Campelli said on Thursday that the government-brokered takeover of Credit Suisse by UBS is “no indication” of the state of European banks.

Standard Chartered chief executive Bill Winters said on Friday that while there were still some issues to be addressed, “it seems that the acute phase of the crisis is done”. 

The latest moves in Europe follow losses in US banks, which tumbled on Thursday even after treasury secretary Janet Yellen told lawmakers that regulators would be prepared for further steps to protect deposits if needed.

• Bloomberg