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Deutsche Bank: DB stock price falls as rising default swaps draw Credit Suisse comparisons

By Jenal Mehta

13:39, 3 October 2022

deutsche bank office with bikes parked in front
Deutsche Bank and Credit Suisse face pressure as economic outlook worsens. Photo - Getty Images

Deutsche Bank (DB) is among the European banks seeing rising credit default swap rates as soaring inflation, rising interest rates and the threat of eurozone recession drive investors into an area of financial markets designed to protect them from the threat of corporate debt default.

Deutsche Bank along with Credit Suisse (CS) are coming under increasing pressure. Some market watchers believe credit risk is likely to get worse placing systemic risk across the whole sector.

The default probabilities across Europe have risen in the past year more than other economies. This increases the chances of counterparty default and raises borrowing costs, all of which makes it difficult for banks to raise capital. An issue already being faced by Credit Suisse (CS).

Deutsche Bank (DB) Price Chart

While German default rates remain much lower than that of other countries in Europe, comparisons are being drawn between the two banks. Credit Suisse's share price has fallen 50% in the past six months while Deutsche Bank shares has dropped 36%.

Both are now being said to be trading under “distressed valuations”. A majority of market analysts have given Deutsche bank a hold rating for now, according to Marketbeat.

Deutsche Bank faces a bleak economic outlook for the coming months. The value of the German DAX 40 (DAX40) has declined 25% year to date. Other European banks such as UBS (UBSG) and HSBC (HSBA) have also significantly lowered in value.

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UBS (UBSG) Price Chart 

German economy

One of the main concerns facing Deutsche bank is the German economy. The Russian-gas dependent economy has had to face a number of challenges in recent months as a consequence of the Ukraine war.


18,037.00 Price
+0.380% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 22:00 (UTC)
Spread 1.8


39,142.20 Price
+0.270% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 22:00 (UTC)
Spread 2.2


5,098.00 Price
+0.330% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 22:00 (UTC)
Spread 0.8


16,770.20 Price
+0.730% 1D Chg, %
Long position overnight fee -0.0234%
Short position overnight fee 0.0015%
Overnight fee time 22:00 (UTC)
Spread 5.0

Stephen Hare, senior economist at Oxford Economics said in a note: “German industry may already be in recession, and eurozone industrial activity is expected to contract over the next three quarters.”

The default risk in Germany has increased by 203% for the coming year, almost at a similar rate as the rest of Europe. This has led to increases in credit default swap rates, indicating that the market is preparing for the worst.


Are the comparisons fair?

While it is true the outlook for the German economy is not the best, Deutsche Bank’s fundamentals remain robust. The bank reported healthy financial results in recent quarters and has not been involved in events which may have affected investor confidence in the company.

The same cannot be said for Credit Suisse. The bank's involvement in scandals can be traced back to 2018, they included spying on executives and lax money laundering controls, and this has slowly eaten away at investor confidence.

The new chair Axel Lehmann plans to turn around the bank's reputation. Starting with a restricting plan due to be announced later this month.

Markets in this article

13.25 USD
0.25 +1.930%
Germany 40
17395.8 USD
-16.2 -0.090%
5.987 USD
0.064 +1.080%
24.75 USD
0.04 +0.160%

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