JPMorgan isn’t concerned about Deutsche Bank , and investors should focus on the European bank’s “solid” fundamentals, analysts from the firm said Friday. Shares of the German lender slid more than 11% on Friday following a spike in the company’s credit default swaps Thursday night. Credit default swaps act as a insurance for bondholders in the event of the company defaults. To be sure, there was no clear catalyst for the spike in Deutsche’s credit default swaps. The move comes as concerns about the stability of European banks persisted. Earlier this month, Swiss regulators forced UBS to acquire rival Credit Suisse to shore up the country’s banking industry. DB 1D mountain DB falls JPMorgan, however, is maintaining its overweight rating on Deutsche Bank. Although it’s “easy to draw comparisons” to the 2015-2018 period, when JPMorgan last had market concerns around Deutsche, investors should focus on the bank’s fundamentals,” analyst Kian Abouhossein said in the note. Abouhossein pointed to three key strengths for Deutsche Bank: “Strong capital ratios (13.4% common equity tier 1 ratio) with limited litigation concerns,” “Strong liquidity ratios (142% liquidity coverage ratio) with limited deposit outflows in 2015-18, even [in] times times of stress,” Strong profitability, with a net profit of €5 billion in 2022 “We are not concerned today about counterparty, liquidity issues with DBK being Top 5 FICC (fixed income, currency and commodities) player globally with $9.5 billion in 2022 FICC revenues,” Abouhossein said. “DBK ‘s recent CDS widening is in our view related to one-way trades of de-risking across all market participants and we don’t see this and the associated share price decline as a reflection of the fundamentals of the bank,” he added. — CNBC’s Michael Bloom contributed reporting.
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