BY KATHERINE FUNG ON 3/24/23 AT 12:24 PM EDT01:32
Fallout Of Silicon Valley Bank Collapse Explained
- Deutsche Bank’s shares dropped 11 percent on Friday and have now fallen 29 percent since the 2023 banking crisis began, sparking fears of a collapse.
- “Looks like the banking crisis hasn’t been entirely put to bed,” Chris Beauchamp, chief market analyst at IG Group, told Reuters.
- Despite the worries, German Chancellor Olaf Scholz and other analysts remain optimistic that the bank won’t suffer the same fate as Credit Suisse.
Another bank is entering troubled territory amid the recent banking crisis that has spilled into global markets—this time in Germany.
Deutsche Bank is facing fears of a collapse after shares dropped 11 percent on Friday morning, bringing those stocks down to a total of 29 percent since the bank chaos began on March 8.
“We are still on edge waiting for another domino to fall, and Deutsche is clearly the next one on everyone’s minds (fairly or unfairly),” Chris Beauchamp, chief market analyst at IG Group, told Reuters. “Looks like the banking crisis hasn’t been entirely put to bed.”
Friday’s stock market news is the latest development related to the fallout from the failure of Silicon Valley Bank (SVB) earlier this month, and the second involving a European bank.
This week, Swiss bank Credit Suisse was rescued by rival UBS in a last-minute deal after Credit Suisse saw a plunge in share prices following the SVB collapse.
Deutsche Bank’s latest slump, driven partly by the Credit Suisse deal, signals that confidence in the banking system remains low. It marks the third week of decline for European banks, which fell 4.2 percent in the wake of the financial turmoil.
Although the government-brokered rescue of Credit Suisse was believed to stabilize European markets, it appears the contagion has been hard to contain. Because holders of $17 billion in bonds from Credit Suisse were not written into the agreement, they were left with nothing, furthering fears about Deutsche Bank.
Despite a multibillion-euro restructure, the fall in Deutsche Bank shares erased any gains and made the German bank the worst performer on the STOXX 600, an index of European stocks.
While many are worried Deutsche Bank could be the next lender to collapse, other analysts have remained optimistic that it won’t suffer the same fate as Credit Suisse.
“We have no concerns about Deutsche’s viability or asset marks.
To be crystal clear— Deutsche is NOT the next Credit Suisse,” research firm Autonomous said in a Friday report.
German Chancellor Olaf Scholz has also dismissed the panic, saying during a Friday news conference that Deutsche Bank had “thoroughly reorganized and modernized its business model and is a very profitable bank.”