More Euro bank fallout hits Triangle – this time it’s Deutsche Bank; shares fall 14%

CARY – Just a week after touting its improving financial performance, Deutsche Bank on Friday is under siege. It’s the second big European bank with a large presence in the Triangle to face stress, joining Credit Suisse, as world banks struggle with growing concerns about risk since Silicon Valley Bank failed two weeks ago.

Shares in Germany’s largest lender fell sharply, dragging down major European banks as fears about weaknesses in the global financial system send fresh shudders through the markets.

Deutsche Bank shares were off 14% in early afternoon trading on the German stock exchange. The drop follows a steep rise in the cost of financial derivatives, known as credit default swaps, that insure bondholders against the bank defaulting on its debts.

Rising costs on insuring debt were also a prelude to a government-backed takeover of Swiss lender Credit Suisse by its rival UBS.

The hastily arranged marriage Sunday aimed to stem the upheaval in the global financial system after the collapse of two U.S. banks and jitters about long-running troubles at Credit Suisse led shares of Switzerland’s second-largest bank to tank and customers to pull out their money last week.

Like Credit Suisse, Deutsche Bank is one of 30 banks considered globally significant financial institutions under international rules, so it is required to hold higher levels of capital reserves because its failure could cause widespread losses.

The Deutsche Bank selloff comes despite the German lender having capital reserves well in excess of regulatory requirements and 10 straight quarters of profits. Last year, it made 5.7 billion euros ($6.1 billion) in after-tax profit.

Deutsche Bank and the German Finance Ministry declined to comment.

Deutsche Bank shares have lost some 20% of their value over the last three days, CNBC reports.

Deutsche Bank’s Cary campus is designated as the US technology center where software development and related services are the focus.

The drop comes as concerns grow about costs of insuring against default, Reuters reports.

Investors also are worried that more banks might suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. That turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.

Credit Suisse’s big Triangle center continues to ‘operate normally’ despite bank’s merger

The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.

Yet on March 17 Deutsche Bank, which established a major technology development center in Cary in 2009, touted its continuing transformation.

“Our 2022 Annual Report underlines how far we have come in transforming Deutsche Bank,” said Christian Sewing, the banks’ CEO in a statement.

“We delivered our best financial results for fifteen years, with strength across all four core businesses. We also proved our resilience thanks to solid capital, a well-diversified and high-quality balance sheet, strong liquidity and tight risk discipline. We are well equipped to help clients navigate challenging conditions and set Deutsche Bank on a course for sustainable growth and returns to shareholders,” he added.

Sewing touted the bank’s efforts in “building a more sustainable Deutsche Bank, creating a diverse and inclusive workplace for our people, further reinforcing our control environment, and contributing to the communities we serve around the globe.”

The Associated Press contributed to this report.