Citi Analyst States Deutsche Bank is Affected by Unstable Market Trends

Deutsche Bank AG's stocks suffered a significant dip on Friday, experiencing their most drastic decline in three years. This indicates that, despite attempts by central bankers and politicians to provide reassurance, there remains major concerns within the financial sector.

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The European banking sector is causing concern once again, and Deutsche Bank has suffered a slump as a result.

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As onlookers attempted to comprehend the shift, financial experts at Citigroup Inc. suggested it could be attributed to a "illogical market." This is not a favorable situation, and there is potential for pessimistic opinions to intensify and manifest into reality.

The danger was emphasized recently by Mark Branson, the leader of BaFin, the German bank regulator. He explained to Bloomberg that while the banking industry in Europe is secure, there is one concern of "contamination through psychology."

Analysts have been examining the decrease in Deutsche Bank shares and have pinpointed several factors that may be causing it. One of these is the increase in the lender's credit default swaps. The analysts are also worried about the bank's potential exposure to commercial real estate, as well as a US Justice Department investigation into banks and their association with Russian sanctions.

Citi analysts, led by Andrew Coombs, commented that neither factor seemed significant enough to account for the market's behavior. Instead, they attributed it to irrationality. Just like Credit Suisse, there is concern that media coverage could affect depositor psychology, even if the initial cause was unfounded.

Even though Deutsche Bank has faced several problems in the past, a significant plan for reform has helped them overcome them. The experts at Citi have stated that Deutsche Bank is making a profit and has a solid foundation of capital and liquidity. Furthermore, analysts at Autonomous believe that there is no reason to worry about the validity of Deutsche Bank or their assets.

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Shares in Deutsche Bank have experienced a significant drop in value throughout the year, with a total decline of 21% over the past fortnight. This is in contrast to a 7.7% rise seen on the German DAX index and the ongoing stability of the Euro Stoxx Bank Index.

Ulrich Urbahn, the leader of the multi-asset strategy and research team at Berenberg, has reported that hedge fund members have been placing more money on the decline of bank stocks lately.

Investors are attempting to predict which bank may encounter future issues, particularly those with high exposure to commercial real estate, according to Urbahn. Nevertheless, this could result in a type of cycle: if more individuals believe that banks are struggling and start to withdraw their deposits, the risks for these banks would only increase further.

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