Deutsche Bank Stock Slides 8% As Debt Default Bets Jump, Reviving Fears

  • Deutsche Bank shares fell 8% in Frankfurt on Friday as fears about the health of big banks revived.
  • The cost of credit default swaps linked to the German bank’s bonds —insurance against default — shot up Thursday.
  • Investors are fretting about the health of Europe’s banks after Credit Suisse’s rescue by UBS last week.

Deutsche Bank shares dropped sharply Friday among signs that more and more traders believe it will default on its debt.

The German bank’s Frankfurt-listed shares were down 8.4% at under 9 euros ($9.65) at last check, while its US-listed shares fell 5% to just over $9 ahead of the opening bell.

The losses came after the cost of Deutsche Bank’s credit default swaps — a form of insurance on it not making scheduled debt repayments — spiked to 173 basis points Thursday from 142 basis points the day before. That was their largest one-day rise on record, according to data from Refinitiv.

Deutsche Bank shares have now shed just under a quarter of their value this month alone, with Europe’s embattled banking sector still rocked by Credit Suisse’s rescue by UBS late last week.

The bank’s Additional Tier 1s – higher-yield bonds that a bank can convert into shares if its financial health falls below a certain level – also sold off sharply Thursday.

Investors have been dumping the bonds, which are also known as contingent convertibles (CoCos), after the Swiss regulator marked the value of Credit Suisse’s AT1s down from 16 billion francs ($17 billion) to zero when it collapsed.

Other European bank stocks also fell Friday with investors still fretting about the health of the continent’s financial institutions.

UBS slipped over 6% in morning trading, while France’s Société Générale dropped 7% and Germany’s Commerzbank fell 9%.

Read more: Credit Suisse’s rescue had a sting in its tail for the banking crisis. Here’s what you need to know about AT1 bonds.