Deutsche Bank AG is the next focal point in Europe's banking turmoil as lingering concerns about the sector sent shares plunge and the cost of default insurance premiums are soaring.
The bank has already weathered a few crises in recent years that have remained under the radar and from which it has recovered. Today, the bank announced that it will redeem a Category 2 subordinated bond earlier than due. Such moves are usually meant to give investors confidence in the strength of its balance sheet, but the stock's reaction suggests the message is not captured.
Deutsche Bank fell as much as 15%, the biggest drop since the pandemic began in March 2020. It was the worst performer in an index of European banking stocks, falling as much as 5.7%. Competitor Commerzbank AG, Spain's Banco de Sabadell SA and France's Société Générale SA also fell sharply.
The widespread declines undermined authorities' hopes that last weekend's government bailout of Credit Suisse Group AG would stabilize the broader sector. Regulators and executives tried all week to reassure traders about the health of the banking sector. Central banks from the Federal Reserve to the Bank of England raised interest rates again this week, remaining focused on inflation in the hope that the worst of the financial turmoil was over.
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