Deutsche Bank and UBS shares hit as banking fears keep tight grip

By Amanda Cooper and Sruthi Shankar

( Reuters )- Heavyweights Deutsche Bank and UBS Group were severely impacted by concerns that the worst issues in the field since the 2008 financial crisis had not yet been resolved. Banks stocks fell sharply in Europe on Friday.

After a sharp increase in the cost of insuring its bonds against the risk of default, the German juggernaut Deutsche Bank fell for the next day, falling more than 8 %.

According to Refinitiv data, its shares have lost a fifth of their value so far this month, and on Thursday, their largest one-day increase on record was marked by credit default swaps ( CDS ), an insurance product for bondholders.

After issuing debt to change them in February, Deutsche Bank announced on Friday that it was redeeming$ 1.5 billion in Tier 2 notes that were anticipated in 2028.

Since two U.S. local banks abruptly collapsed this month, raising concerns that it might spread to many lenders, the global banking industry has been rocked.

Politicians have emphasized that the upheaval is distinct from the global financial crisis of 15 years ago, claiming that banks are better capitalized and that money is easier to come by.

However, the concerns have quickly spread, and on Sunday UBS was hurried into acquiring European gaze Credit Suisse AG after the troubled merchant lost investors’ trust.

According to two places with knowledge of the programs, Swiss government and UBS are rushing to appropriate the invasion within as little as a month in an effort to keep Credit Suisse’s clients and employees.

To prevent a abilities migration, UBS has promised loyalty packages to Credit Suisse income management personnel in Asia, according to various sources.

According to Brokerage Group Jefferies, the merger of its former rival had switch UBS ‘ equity story, which was based on a lower risk profile, an emphasis on organic growth, and huge capital returns.

According to the statement,” all of these components, which UBS owners bought into, are gone, probably for year.”

A U.S. Department of Justice investigation into whether financial experts assisted Russian oligarchs in evading sanctions has also put Credit Suisse and UBS under investigation, according to Bloomberg News.

The Justice Department did not respond right away to Reuters’ email requests for comment, and Credit Suisse and UBS both declined to comment.

British banks lost 2.5 % in early trading, down for a third straight session, while the index of top European banks fell 2.9 %.

DEPOSIT CAREFULNESS

The declines in German bank stocks came after losses on Thursday in the US, where investors were watching to see how far the government would go to support the industry, especially vulnerable regional banks.

U.S. Treasury Secretary Janet Yellen spoke to comfort Americans that the country’s banking system is secure for the third time in a year.

She informed U.S. lawmakers that, like the failed Silicon Valley Bank ( SVB ) and Signature Bank, bank regulators and the Treasury were ready to provide comprehensive deposit guarantees at other banks.

Officials continue to be wary of public opinions that businesses are being bailed out once more in the wake of outrage over the firm’s expensive save in 2008.

The acquisition of Credit Suisse has already sparked broader worries about investors’ access to a precarious banking industry. The$ 275 billion AT1 bond market was shaken by the decision to give shareholders priority over Additional Tier 1 ( AT1 ) bondholders.

To avoid the burden of subsidies falling on citizens, these convertible bonds were created to be used during rescue.

The Swiss regulator made the decision to eliminate Credit Suisse’s AT1 bonds with a nominal value of$ 17 billion as part of the agreement, shocking the world credit markets.

The destruction, according to Standard Chartered Chief Executive Bill Winters,” had profound” effects on international banks regulations.

Additionally, he stated that the U.S. Federal Reserve’s decision to maintain non-insured deposits was a” moral to” to naysayers in Hong Kong.

According to Winters,” I believe it had very significant ramifications for bank regulation and the way that businesses manage themselves.”

Following the failures of SVB and Signature Bank, which allowed them to protect insured deposits, including those of powerful solutions executives and crypto investors, U.S. authorities had invoked” widespread danger exceptions.”

( Writing toby Chopra, reporting by Sruthi Shankar in the Bengaluru and Reuters offices, and editing by Catherine Evans and Jason Neely )

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