Deutsche Bank’s share price gained 5.3 per cent during Monday morning’s trading after tanking on Friday as the cost of insuring the company’s debt against default soared.
The banking sector has been extremely volatile since the collapse of Silicon Valley Bank (SVB) and the emergency acquisition of Credit Suisse by UBS, with many wondering which lender could be the next victim.
Rupert Thompson chief economist at Kingswood said he thought Friday’s share price movements were “overdone” at Deutsche Bank. “The banks both in the UK and Europe are in pretty good health and Credit Suisse was a special case,” he continued.
Since the collapse of SVB, Deutsche’s share price has fallen over 20 per cent.
Other European banks also posted gains this morning. BNP Paribas rose 1.9 per cent, Santander climbed 0.9 per cent, while Unicredit was 1.2 per cent higher. UBS inched up 0.2 per cent.
The wider Stoxx 600 banking index rose 1.4 per cent, and the cost of insuring debt against defaults fell across the banks too.
The gains came following the news that First Citizens Bank will buy a large portion of SVB’s assets.
First Citizens said it will acquire large parts of the loans and deposits of SVB from the Federal Deposit Insurance Scheme (FDIC).
Under the deal, First Citizens will assume SVB assets of $110bn, deposits of $56bn and loans of $72bn.
“Shunting parts of the failed bank off to a new owner may give the regulator more capacity to deal with problems still threatening to pop up elsewhere, particularly with US regional banks,” Hargreaves Lansdown’s Susannah Streeter commented.
Ahead of the opening bell on Wall Street, shares in several regional US banks also recovered.
Shares in embattled lender First Republic were up more than 28 per cent, while the share prices of Western Alliance and PacWest jumped up 6.2 per cent and 11 per cent respectively.
However, despite the steady recovery this morning, analysts warned that this calm was not guaranteed to last.
“The pall of banking stress still hangs over the market,” Finalto’s Neil Wilson said. “There is not yet the sense that the market has stopped looking for its next victim.”