Bank Stocks Sell-off – Trustnodes

Deutsche Bank has crashed 15% after a spike in credit default swaps with other European banks, including Commerzbank and Barclays, falling by about 8%.

In the United States First Republic is down another 6% pre-market after falling by as much yesterday.

Charles Schwab was also down 6% yesterday, down 2% pre-market, while the likes of JP Morgan were calmer yesterday at -0.2%, but down 2% today.

European stocks overall are red in France, Germany and England as a third Friday continues with bank worries.

Deutsche Bank itself was profitable last year with an annual net income of €5 billion, up 159% from the previous year, following a seemingly successful restructuring that began in 2019.

That same year the repo market froze in September 2019 due to a significant shortage of cash, which led to a spike in short-term borrowing rates.

Fed intervened at the time, injecting billions of dollars to stabilize interest rates, with measures taken during the pandemic then flooding the market.

For much of the year however Fed has been busy taking out liquidity from commercial banks, including a new high of $2.65 trillion that sits on reverse repos (sort of a bank account at the Fed outside of the commercial banking system).

The aggressive tightening continued on Wednesday with another hike by the Fed, despite two US banks with $300 billion in deposits going under and one European bank with $600 billion rescued by the Swiss authorities.

Nonetheless the prospects of a pause in rate hikes initially calmed Thursday, but there’s now a serious debate on whether all deposits should be insured by banks putting aside some of their profits during the good times to a state run insurance fund.

The US secretary Janet Yellen said this was not being considered, sending First Republic and many other US banks down circa 10% on Wednesday, further sparking a continued scrutiny of banks.

Deutsche Bank has been under market pressure for years in part because US authorities have aggressively targeted it with action, compared to their approach towards US banks.

The spike in credit default swaps for the bank, suggesting there’s a 30% default risk, comes after its stock has fallen by 30% last month.

However, although it is more in red than other banks due to the previous market pressures, pretty much all banks are down today, and a number of them are significantly down.