Irish bank shares hit as European financial stocks slump

Fresh concerns about stability of Deutsche Bank put markets on edge

Deutsche Bank fell nearly 9 per cent to below €10 for the first time. Photograph: Kai Pfaffenbach/Reuters

Deutsche Bank fell nearly 9 per cent to below €10 for the first time. Photograph: Kai Pfaffenbach/Reuters

 

Irish bank shares were hit on Friday morning by a sell-off across Europe, amid fresh concerns about the stability of Deutsche Bank. European shares fell sharply in early dealing to touch their lowest level in eight weeks, with banking stocks worst hit.

In Dublin the Iseq index of Irish shares was down by close to 1.5 per cent. Among the biggest losers was Bank of Ireland, which lost 3.4 per cent to 17.1 cent before recovering slightly to 17.2 cent, while Permanent TSB lost 2 per cent to €1.90 cent. Other major stocks such as CRH, Smurfit Kappa and Ryanair were also weaker.

In early trade, he pan-European Stoxx 600 index was down 1.6 per cent, having touched its lowest level since early August, as the Stoxx Europe Banks index fell 3 per cent, the biggest sectoral faller. No sector was in positive territory.

Deutsche Bank

Deutsche Bank fell nearly 9 per cent to below €10 for the first time after Bloomberg reported that some hedge funds that clear derivatives trades with the bank had withdrawn some excess cash, a sign that counterparties are wary of doing business with it.

In a statement on Friday, Deutsche reiterated its trading clients remained largely supportive.

One large hedge fund in Asia had pulled out its collateral from Deutsche amounting to $50 million in the last two days, while another fund which had a “smallish amount” with the bank was monitoring the situation closely and had not pulled out yet, people familiar with the matter told Reuters on Friday.

Another person with knowledge of the development said it was common to see fluctuations in balances among hedge fund clients, and these actions represented a small portion of the bank’s more than 800 clients in the hedge fund business.

In a statement on Friday, Deutsche reiterated its trading clients remained largely supportive. “We are confident the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the US and the progress we are making with our strategy,” it said.