Deutsche Bank recovers as fears for European banks ease

Company

By means of Ariel Silver

March 27, 2023 | 8:23 am

Shares of Deutsche Bank rebounded early Monday morning, allaying fears about Europe’s shaky banking system following a slight fall in the cost of insuring the lender’s debt against default.

Deutsche Bank shares traded up 4.4% in the green on the Frankfurt Stock Exchange’s DAX index on Monday.

Other European banking stocks also posted gains on Monday, giving nervous observers a sigh of relief.

European stocks opened higher on Monday, with German lender Commerzbank AG up 2.4% and BNP Paribas up 1.2%.

Shares of Deutsche Bank fell 8.5% on Friday after the cost of five-year credit default swaps — the insurance creditors pay to protect against potential default — rose to 200 basis points.

The surge left analysts wondering whether Deutsche Bank was the next financial lender to bail out – akin to Swiss giant Credit Suisse, which was acquired by its old rival UBS for a bargain price of $3.2 billion.

But Wall Street analysts and German officials dismissed concerns about Deutsche Bank’s stability.

“Deutsche Bank has thoroughly modernized and reorganized its activities and is a very profitable bank,” German Chancellor Olaf Scholz said after a European Union summit in Brussels.

On the other side of the Atlantic, Dow futures rose more than 230 points before the opening bell on Wall Street on Monday after First Citizens stepped in to take over a large chunk of failed lender Silicon Valley Bank.

First Citizens will pay a $16.5 billion rebate to take control of $72 billion in deposits and loans from SVB, according to an announcement from the Federal Deposit Insurance Corporation.

But the FDIC will remain in trusteeship of about $90 billion in securities and other assets.

Since SVB’s collapse earlier this month, the FDIC has placed all deposits under the control of a “bridge bank” to protect customers.

“The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023,” the FDIC statement said Monday.

“Customers of Silicon Valley Bridge Bank, National Association should continue to use their current branch until they receive notification from First-Citizens Bank & Trust Company that system conversions have been completed to enable full-service banking at all of its other branches. ”

Two days after SVB’s fall, New York-based Signature Bank was seized by regulators in the third-largest bank failure in the US.

In both cases, the government agreed to cover deposits, even those that exceeded the $250,000 federally insured limit, so that depositors could access their funds.

New York Community Bank agreed to buy a significant portion of Signature Bank a week ago in a $2.7 billion deal, but the search for a buyer for SVB took longer.

Shares of First Citizen traded on the Nasdaq rose 12.4% Monday to $654.95 in premarket trading.

Shares of midsize San Francisco-based First Republic Bank, which serves a similar clientele to the SVB and appeared to be facing a similar crisis, rose 24.3% in premarket trading.

First Republic was the recipient of a $30 billion bailout package put together by 11 of the nation’s largest lenders after its shaky balance sheet sparked concerns it would be the next bank to fall.

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