Deutsche Bank heads new rout for banking stocks on financial markets
There is a renewed rush away from banking shares across Europe as the market's attention turns towards Germany's largest lender.
Germany's largest bank has become the focus in a new wave of selling across banking and wider financial stocks, less than a week after the forced takeover of Credit Suisse.
Deutsche Bank shares fell more than 14% at one point during a volatile day of trading Europe-wide, but in late trading were around 8% down.
The bank's so-called credit default swap rate was up by almost a fifth.
It essentially represents a sharp jump in its cost of insuring against the risk of default.
Major banks in France and Germany also suffered share price hits, with Commerzbank around 5% down heading towards the close, while BNP Paribas and Societe Generale suffered similar declines of around 5% and 6% respectively.
In the US, shares were also hit, with troubled regional lender First Republic Bank initially falling 4% soon after opening, but was later 1% down.
London-listed banks were not spared pain either.
Markets have been jittery for weeks in the wake of the failure of Silicon Valley Bank in the US.
Fears about the impact of rising interest rates on banks' bond holdings have since claimed a major scalp in Credit Suisse, Switzerland's second-largest bank.
It was forced by regulators into a takeover by larger rival UBS last weekend, before financial markets opened for business on Monday.
It took until Friday for a new focus to emerge.
Chris Beauchamp, chief market analyst at IG, said: "We are still on edge waiting for another domino to fall, and Deutsche is clearly the next one on everyone's minds (fairly or unfairly).
"Looks like the banking crisis hasn't been entirely put to bed."
Banking stocks were down across the board in Europe, with the German DAX almost 2% down in late trading.
Deutsche Bank employs 7,000 staff in the City of London where the FTSE 100 was 1.26% lower by the end of the day.
Barclays closed 4.2% down, while NatWest, HSBC and Lloyds finished with declines of 3.6%, 2.6% and 2.4% respectively.
Wider economy stocks - such as mining and energy shares - also fell on fears the crisis of confidence in the banking sector would curtail the availability of credit and therefore economic growth.
The government and the Bank of England have previously moved to reassure investors that the UK banking system is at no risk as the financial strength of lenders is very high compared to pre-financial crisis levels and their European peers.
HSBC itself has spoken out in support of the sector.
"We're not worried about liquidity issues for UK banks, as they run with high levels of central bank reserves and shouldn't need to sell bond portfolios to meet deposit outflows," it said.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Just as hopes had risen that contagion would be contained, banking stocks in Europe have been battered again by fears that fresh problems could be lurking...
"Waves of bad news keep hitting the banking sector and the tide doesn't look like it's set to turn any time soon."
But she added the European Central Bank had made clear it was standing by to boost liquidity if needed, and noted that the Bank of England was also firm in its belief there is still no systemic risk.