Deutsche Bank AG (ETR : DBK) shareholders are the latest to take a haircut from the ongoing global banking crisis.
Shares in the German banking giant tumbled 8.5% in Europe on Friday. That puts the Deutsche Bank share price down a painful 26% over the past month.
While the banking crisis remains largely mired in the United States and Europe, S&P/ASX 200 Index (ASX: XJO) bank shares are again in focus as analysts assess their relative strength.
And judging by this morning's performance, the big Aussie banks are stacking up well to their international peers.
Here's how the big four ASX 200 banks are tracking in early trade on Monday:
- Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares are up 0.58%
- National Australia Bank Ltd (ASX: NAB) shares are up 0.88%
- Westpac Banking Corp (ASX: WBC) shares are up 0.59%
- Commonwealth Bank of Australia (ASX: CBA) shares are up 0.31%
The ASX 200 is up 0.35% at this same time.
So, why is Deutsche Bank the latest to come under pressure?
What's happening with Deutsche Bank?
Deutsche Bank is the latest institution to be hit by investor fears of a global banking meltdown.
Those fears were ignited only weeks ago with the implosion of United States-based Silicon Valley Bank – formerly the 18th largest in the US – as well as Signature Bank. Other smaller regional US banks remain under pressure.
The contagion quickly spread across the pond to hit Credit Suisse. That bank was said to be a day from collapse when the Swiss government engineered a takeover by rival bank, UBS.
Unlike Credit Suisse, which was running at a loss, Deutsche Bank reported a net profit of €5.7 billion (AU$9.2 billion) in 2022.
Instead, the woes at Deutsche Bank stem from a steep rise in the cost of insuring its bonds against the risk of defaulting.
The German bank has also drawn the interest of short sellers, who've reportedly made some $150 million betting against its shares over the past two weeks.
In a sign that investors fear the contagion has some ways to run yet, the European bank shares index, STXE 600 BANKS PR.EUR (INDEXSTOXX: SX7P) ended Friday down 3.8%.
What the experts are saying
European officials were quick to try to calm the markets.
Addressing concerns around Deutsche Bank, German Chancellor Olaf Scholz said, "It's a very profitable bank. There's no reason to worry."
Joseph Trevisani, senior analyst at FXstreet.com advised investors to have patience, saying the banking crisis would take some time to play out.
"The market is suspicious, or weary is maybe a better way to put it, that there are more problems out there that have come forth," Trevisani said (quoted by Reuters).
"It takes time. It's going to have to be weeks without any problems in the banking system before markets will be convinced that it's not a systemic problem."
Most analysts were positive about the outlook for Deutsche Bank, including the team at JPMorgan.
They said the bank's fundamentals are "solid", adding, "we are not concerned".
Commenting on the banking turmoil before Friday's big tumble for Deutsche Bank shares, ANZ Bank chief executive Shayne Elliott said (quoted by The Australian Financial Review):
The GFC was fundamentally a crisis around the quality of assets and the loans that banks make, and that's not what the risk is here. This is a different issue.
This is really to do with the global war on inflation and how central banks are raising rates very quickly in order to combat that, and that has casualties.
With the big four ASX 200 banks all well into the green today, investors appear to believe they won't be amongst those casualties.
