Source: Wall Street News
ECB regulators met last Friday to believe that banks in the Eurozone are not at risk of infection. The market doesn't think so.
Currently, negative reports about the European banking industry are still concentrated in Switzerland, but the credit market has not let go of Deutsche Bank (Deutsche Bank), Germany's largest commercial bank. Bloomberg's macro strategist Simon White discovered that among European banks, the five-year credit default swaps (CDS) fluctuated the most in a single day, and interest spreads widened even more than UBS.
On Monday of this week, after the official announcement of the acquisition of Credit Suisse last weekend, UBS's stock price fell more than 8% at the opening of the market. At one point, the decline reached 16% in early trading. Since then, it has continued to rise, turning higher in the afternoon session, closing up about 1.3%. However, UBS's CDS did not rebound at the same time.
Over the past month, Deutsche Bank's CDS has increased and expanded almost as much as UBS. However, Deutsche Bank does not have the burden of having to carry the burden of Credit Suisse, which has assets of 575 billion US dollars under government coordination like UBS.
For most of the past ten years, Deutsche Bank's revenue has declined, and the bank's governance has also faced problems. For example, German banking regulator BaFin accuses the bank of poor money laundering controls. However, over the past two years, Deutsche Bank's revenue and profitability have improved.
Simon White pointed out that in this wave of European bank stock rebound that began last summer, Deutsche Bank's performance lagged behind, and the bank's net market ratio was still low. Compared to 2008, Deutsche Bank's risk of infection is much lower, but it is not without risk.
Also, transmission has not always been entirely logical. Credit Suisse's tier-1 capital ratio is still higher than that of Deutsche Bank. Isn't there something wrong?
White believes that CDS spreads should be watched to see if pressure is spreading and where it is spreading.
Editor/jayden