European banking share prices came under fresh pressure on Friday as a spike in the cost of Deutsche Bank’s credit default swaps (CDS) sparked renewed concerns about the stability of the sector.
Deutsche Bank’s shares fell by more than 8% in early trade, retreating for a third consecutive day, as pricing for CDS, a form of insurance for a company’s bondholders against its default, leapt to 173 basis points on Thursday night from 142 basis points the previous day.
WTF? Costs of insuring against Deutsche Bank default (CDS prices) jump in violent move while share price plunge as stress in banking system keeps rising following Fed rate hike. pic.twitter.com/yt56WL1df9
— Holger Zschaepitz (@Schuldensuehner) March 23, 2023
Deutsche Bank’s additional tier one (AT1) bonds, an asset class that hit the headlines this week after the controversial writedown of Credit Suisse’s AT1s as part of its UBS rescue deal, also sold off sharply.
CDS pricing for Barclays and Societe Generale also soared.
In London, the FSE 100 is down 1.2%, while in Europe the Dax has slipped 1.6% and in France the Cac-40 has fallen 1.5%.
Standard Chartered, NatWest, Barclays and Lloyds Banking Group PLC (LSE:LLOY) are all prominent fallers, down 3.9%, 3.7%, 3.5% and 1.8% respectively.
In Europe, the Euro Stoxx 600 banks index, which contains the region’s biggest lenders, fell 1.9%. Deutsche Bank fell 8.3%, Commerzbank 4.7%, Société Générale 4% and BNP Paribas 3.2%.