Shares in Deutsche Bank closed down 8.6% Friday, paring earlier losses.
The bank’s stock had sunk as much as 14.5% earlier in the day as investors fretted over whether turmoil in the financial sector had spread to Germany’s biggest lender.
The cost of buying insurance against a possible default by Deutsche Bank has soared in recent days. Its five-year credit default swaps surged to 203 basis points Thursday, according to data from S&P Market Intelligence. That’s the highest level since early 2019. The swaps continued to climb Friday, trading at 208 basis points at midday ET.
The bank has been a problem child for years. Over the past decade, Deutsche Bank racked up billions of dollars in losses as it struggled to compete with larger Wall Street rivals and paid the price of a string of scandals. It has gone through several strategy changes, major restructurings and mass layoffs over the past five years.
The bank has since rebounded strongly under CEO Christian Sewing, and last month reported its highest pre-tax profit in 15 years.
Analysts told CNN that rising interest rates, as well as an announcement by Deutsche Bank Friday that it would pay back one of its bonds five years early, had rattled investors.
Repaying bonds before their maturity is usually an indication that a bank's balance sheet is in good health. But some investors may have interpreted the move as a sign Deutsche Bank is nervous about the banking sector, Jonas Goltermann, deputy chief markets economist at Capital Economics, told CNN.
Deutsche Bank's decision to pay back the bond ahead of schedule was pre-planned and not a reaction to recent market developments, a source familiar with the matter told CNN. The bond would have gradually lost its eligibility as a form of regulatory capital according to rules brought in after the 2008 financial crisis, the source said.
The bank replaced the bond by issuing another bond of the same type in February, they added.