(MENAFN) German Chancellor Olaf Scholz has assured the public that Deutsche Bank remains profitable and there is no reason to doubt its future, amid a sharp fall in the bank's share price. During a news conference in Brussels, Scholz stated that Deutsche Bank has thoroughly reorganised and modernised its business model, making it a very profitable bank. However, banking stocks fell sharply in Europe on Friday, with Deutsche Bank and UBS Group being hit by worries that the worst problems in the sector since the 2008 financial crisis have not yet been contained.
Deutsche Bank's share price has fallen for a third day, dropping more than 12% after a sharp increase in the cost of insuring the bank's bonds against the risk of default. The cost of its five-year credit default swaps (CDS) – a form of insurance for bondholders – has also jumped to a four-year high, based on data from S&P Market Intelligence. Shares in Germany's largest bank have lost a fifth of their value so far this month, raising concerns about the bank's future.
Stuart Cole, head macroeconomist at Equiti Capital, commented on Deutsche Bank's situation, saying that the bank has been in the spotlight for a while now, in a similar way to how Credit Suisse had been. He added that Deutsche Bank has gone through various restructurings and changes of leadership in attempts to get it back on a solid footing, but so far, none of these efforts appear to have really worked.
Despite these concerns, Chancellor Scholz's assurance of Deutsche Bank's profitability provides some hope for investors. However, the situation remains uncertain, and it is unclear whether Deutsche Bank will be able to bounce back from this recent setback. The global banking sector is facing significant challenges, and it remains to be seen whether banks like Deutsche Bank will be able to navigate the current economic climate successfully.
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