Shares in Deutsche Bank fell sharply on Friday, as fears about vulnerabilities in Germany’s largest lender sent investors for the exits.
Deutsche Bank shares were off 14 per cent on the German stock exchange, and have now lost a fifth of their value since the start of March.
The drop in the share price on Friday comes amid a steep rise in the cost of financial derivatives pegged to the bank, known as credit default swaps.
Credit default swaps (CDS) are essentially insurance, which pay off if a company defaults on its loans. The higher the price of the insurance, the more likely the market thinks the underlying company is to default.
The price of a five-year Deutsche Bank CDS touched 220 basis points on Friday, up from 142 just two days ago, according to S&P Global Intelligence. That’s the highest level for a Deutsche Bank CDS since 2018.
It is still far short, however, of the price that swaps reached at other banks of late.
Prior to Credit Suisse being bailed out by UBS, the price of its swaps went as high as 1,194, S&P says.
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.
Worries persist despite ostensibly strong numbers
Fears about Deutsche Bank come despite the lender’s financial results showing capital reserves well in excess of regulatory requirements and 10 straight quarters of profitability. In 2022, the bank made 5.7 billion euros ($8.45 billion Cdn) in after-tax profit.
But the ongoing crisis underway in the global banking system is being partly driven by emotion, and not always fundamentals.
Banks around the world have been gripped by fears after the sudden and unexpected collapse of several U.S. banks.
Although the details are different in each case, the underlying cause of all the problems is sharply higher interest rates, which are a double-edged sword for lenders because they increase the returns from their loans, but sharply reduce the value of their government bond holdings if they are forced to sell them to meet deposit requests.
“Two weeks ago we thought this was kind of an isolated event that began with Silicon Valley Bank and then it spread to First Republic and Signature Bank,” said Peter Tuz, president of Chase Investment Council. “Today it kind of confirmed this is a global issue right now, and nobody knows where it will end. So people are acting with their feet and continuing to sell bank stocks.”
Shares in other European banks were also lower on Friday, but not by as much as Deutsche Bank was. Germany’s Commerzbank was down 8.4 per cent, France’s Société Generale was down 7.2 per cent, Austria’s Raiffaisen was
off 7.5 per cent and the soon-to-merge Credit Suisse and UBS were down 8.6 and eight per cent, respectively.
Deutsche Bank and the German Finance Ministry declined to comment.
TORONTO – Cineplex Inc. reported a loss in its latest quarter compared with a profit a year ago as it was hit by a fine for deceptive marketing practices imposed by the Competition Tribunal.
The movie theatre company says it lost $24.7 million or 39 cents per diluted share for the quarter ended Sept. 30 compared with a profit of $29.7 million or 40 cents per diluted share a year earlier.
The results in the most recent quarter included a $39.2-million provision related to the Competition Tribunal decision, which Cineplex is appealing.
The Competition Bureau accused the company of misleading theatregoers by not immediately presenting them with the full price of a movie ticket when they purchased seats online, a view the company has rejected.
Revenue for the quarter totalled $395.6 million, down from $414.5 million in the same quarter last year, while theatre attendance totalled 13.3 million for the quarter compared with nearly 15.7 million a year earlier.
Box office revenue per patron in the quarter climbed to $13.19 compared with $12 in the same quarter last year, while concession revenue per patron amounted to $9.85, up from $8.44 a year ago.
This report by The Canadian Press was first published Nov. 6, 2024.
TORONTO – Restaurant Brands International Inc. reported net income of US$357 million for its third quarter, down from US$364 million in the same quarter last year.
The company, which keeps its books in U.S. dollars, says its profit amounted to 79 cents US per diluted share for the quarter ended Sept. 30 compared with 79 cents US per diluted share a year earlier.
Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs, totalled US$2.29 billion, up from US$1.84 billion in the same quarter last year.
Consolidated comparable sales were up 0.3 per cent.
On an adjusted basis, Restaurant Brands says it earned 93 cents US per diluted share in its latest quarter, up from an adjusted profit of 90 cents US per diluted share a year earlier.
The average analyst estimate had been for a profit of 95 cents US per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
ST. JOHN’S, N.L. – Fortis Inc. reported a third-quarter profit of $420 million, up from $394 million in the same quarter last year.
The electric and gas utility says the profit amounted to 85 cents per share for the quarter ended Sept. 30, up from 81 cents per share a year earlier.
Fortis says the increase was driven by rate base growth across its utilities, and strong earnings in Arizona largely reflecting new customer rates at Tucson Electric Power.
Revenue in the quarter totalled $2.77 billion, up from $2.72 billion in the same quarter last year.
On an adjusted basis, Fortis says it earned 85 cents per share in its latest quarter, up from an adjusted profit of 84 cents per share in the third quarter of 2023.
The average analyst estimate had been for a profit of 82 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 5, 2024.
