BLOG

Deutsche Bank shares are down 6%, at their lowest since Nov 2016 (near post-crisis lows), after warning that euro strength and higher funding costs will weigh on revenue in the securities unit this quarter (just a week after the lender voiced optimism about the outlook for the year).

Bloomberg reports that the company’s corporate and investment bank unit faces a 300 million-euro ($368 million) headwind from the currency effect and 150 million euros from higher funding costs, Chief Financial Officer James von Moltkesaid at an investor conference in London on Wednesday.

The reaction was a swift 5% plunge in the stock...

Heading back towards 2016 post-crisis lows...

Marcus Schenck, co-head of the corporate and investment bank, said at a separate event in London Wednesday that the lender still has some work to do convincing its shareholders it’s turnaround is on track.

“John has always made it very clear. Look, this is not a one-quarter journey. This is a several-year journey,” Schenck said. “We think we’re on the right path with that journey. But we definitely are a show-me case.”

We suggest "some work" is perhaps an understatement.

However, it's not just Deutsche that has been showing signs of strain recently in the credit markets... Many of the major prime brokers are seeing CDS breaking out...

 

And more ominously, US financial credit risk is flashing red while bank stocks shrug it off (for now)...

This will not end well.