Deutsche Bank and UBS Shares Dip; understand – 03/24/2023 – Market

European bank shares showed sharp falls on Friday (24), with Deutsche Bank and UBS Group affected by concerns that the worst problems in the sector since the 2008 financial crisis have not yet been contained.

Deutsche Bank was down 13% on Friday morning, while UBS was down more than 6%. The German bank’s shares have fallen for three straight sessions, pressured by a jump in the cost of insuring the institution’s bonds against default risk.

Deutsche Bank shares have lost a fifth of their value so far this month and the cost of credit default swaps (CDS) DB5YEUAM=MG – a form of insurance for bondholders – jumped to a four-year high on Friday, based on data from S&P Market Intelligence.

“Deutsche Bank has been in the spotlight for a while now, much like Credit Suisse has,” said Stuart Cole, chief macroeconomist at Equiti Capital.

“The bank has gone through several restructurings and leadership changes in an attempt to get it back on a solid footing, but so far none of these efforts seem to have really worked.”

Deutsche Bank declined to comment when contacted by Reuters.

The global banking sector has been rocked since the sudden collapse this month of two US regional banks. Monetary policymakers emphasize that the turmoil is different from the global financial crisis of 15 years ago, saying banks are better capitalized and funds are more readily available.

But worries remain among investors after UBS’s emergency purchase of Credit Suisse last Sunday.

Swiss authorities and UBS are racing to complete the acquisition in less than a month, according to two sources with knowledge of the plans.

Different sources told Reuters that UBS had promised retention packages for Credit Suisse wealth management executives in Asia to stem an exodus of talent.

Jefferies has lowered a “buy” to “hold” rating on UBS shares, saying the acquisition of Credit Suisse changes the investment thesis in UBS, which was based on a lower risk profile, organic growth and high equity returns. capital.

“All those elements, which is what UBS shareholders bought into, have disappeared, probably for years,” he said.

Separately, Bloomberg News reported that Credit Suisse and UBS are among the banks being investigated by the US government over possible support by executives of the two institutions to Russian oligarchs against sanctions applied by Washington.

Credit Suisse and UBS declined to comment, while the US Department of Justice did not immediately respond to Reuters requests for comment.

Investor concerns about the financial sector were widespread, with the index of major European banks falling 5% and British banks losing 4.4%, down for a third straight session.

“We’re still on edge, waiting for another domino to fall, and Deutsche is clearly next on everyone’s minds (wrongly or not),” said Chris Beauchamp, chief market analyst at IG.

“It appears that the banking crisis has not been fully resolved,” Beauchamp said.