First Silicon Valley Bank, then Credit Suisse, now Deutsche Bank? Shares in Germany’s biggest lender fell by 14% at one point during Friday’s trading session before rebounding later in the day and trimming losses to around 3%. With the bank losing a fifth of its value since the beginning of March, its troubles set up a nervy atmosphere heading into this weekend after both SVB and Credit Suisse disappeared earlier this month after turbulent Friday trading. Some observers have pointed to a sudden surge in the cost of insuring Deutsche Bank’s debt against a possible default as a reason for the plunge, but most onlookers say the dip may be best explained by a pervading sense of fear in the industry. For its part, Citibank fears animal spirits at work.
“We view this as an irrational market,” Citibank analysts led by Andrew Coombs, director of equity research for European banks, wrote in a Friday note. Last week's downfall of Switzerland’s Credit Suisse and its subsequent takeover by domestic rival UBS in a deal brokered by the government, following the second-biggest ever U.S. banking failure in the form of SVB, has left European banks on red alert over whether banking contagion will continue spreading while exacerbating a climate of fear that could be much ado about nothing.
