The focus of attention of the world stock markets, which in recent weeks has been on two American banks and on the European Credit Suisse, has shifted today to Germany, where the shares of Deutsche Bank fell more than 12% at mid-morning. That bad behavior of the German giant has dragged down the banking values ??of half of Europe once again. They are already more than two weeks of financial storm.
Banc Sabadell falls 7% and BBVA 5% when the European stock markets have not yet opened. The losses of European banks push down the main indices of the continent. The Ibex and the German Dax are left more than 2%.
Deutsche Bank hunts today for the third day in a row. One of the reasons why there has been a sharp increase in the cost of insuring their bonds against default risk. That means investors are less confident in the bank’s ability to repay its debts. Antonio Castelo, an analyst at iBroker, has pointed out that when the market catches a bank, it doesn’t matter if it has solvency or not, they can sink it. Castelo adds that “on the stock market, the banking sector behaves very herd and when one falls, they all fall.”
Pedro del Pozo, director of financial investments at Mutualidad de la Abogacía, believes that “more than a banking crisis, what we are seeing is a loss of confidence in banks due to poor management in a complicated context.”
Deutsche Bank said on Friday it would write down $1.5 billion of Tier 2 bonds due 2028, after issuing debt to replace them in February, Reuters reports.
Another indicator that investors take for granted that we are facing a paradigm shift is that the Euribor in its daily rate has fallen again to 3.5% from 3.7% the day before. The banks insist that perhaps there will be no further rate hikes because the ECB (European Central Bank) is more concerned with the financial storm than with inflation.
The falls in European bank stocks followed losses in the United States on Thursday, where investors were watching how far authorities would go to prop up the sector, especially fragile regional banks. For the fourth time in a week, US Treasury Secretary Janet Yellen spoke to reassure Americans about the safety of the US banking system. Yellen told US lawmakers that banking regulators and the Treasury were prepared to offer extensive deposit guarantees at other banks, as they did at failed Silicon Valley Bank (SVB) and Signature Bank.
The Credit Suisse acquisition has also raised concerns. The decision to prioritize shareholders over additional tier 1 (AT1) bondholders rocked the $275 billion worth of AT1 bond market. These convertible bonds were designed to be used during bailouts in order to prevent the costs of bailouts from falling on taxpayers.
