Deutsche Bank became the latest focus of the banking turmoil in Europe as ongoing concern about the industry sent its shares slumping the most in three years and the cost ofThe bank, which has staged a recovery in recent years after a series of crises, said Friday it will redeem a tier 2 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 isn’t getting through.
Deutsche Bank slumped as much as 15 per cent, 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 per cent. Crosstown rival Commerzbank, Spain’s Banco de Sabadell and France’s Societe Generale also saw steep drops.
The latest turmoil for Europe’s banks follows a selloff in US lenders, which tumbled Thursday even after Treasury Secretary Janet Yellen told lawmakers that regulators would be prepared for further steps to protect deposits if needed. The cost of insuring Deutsche Bank’s five-year senior bonds was quoted at around 220 basis points on Friday morning. While that’s elevated for a major European bank, it’s still a long way off the highs of Credit Suisse last week. The Swiss bank’s 1-year CDS blew out past 3000 basis points at the height of the turmoil.
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