Shares in Germany’s largest lender led declines across the European banking sector on Friday in the clearest signal yet that the acquisition of Credit Suisse by UBS has not put anxiety about the sector to rest.

Deutsche Bank [DBK] fell as much as 15% in the first hours of trading in Frankfurt, hitting a five-month intraday low and extending losses for the month of March, which has been defined by a parallel confidence crises in US regional banks, to 32%. Deutsche Bank ended the Friday session down 8.5%.


Regional peers BNP Paribas [BNP], Societe Generale [GLE], Commerzbank [CBK] and Raiffeisen [RBI] also declined.

"After the disappearance of Credit Suisse as European banking’s problem child, many investors are looking for the next-worst bank to avoid," Morningstar banking analyst Niklas Kammer said on Friday.

"Where are large, inscrutable investment banking exposures? Where are the profitability challenges? Deutsche Bank and Commerzbank will be popular answers due to their troubles in recent years."

Société Générale and BNP Paribas also have sizable investment banking operations. Meanwhile, Commerzbank remains in the middle of a restructuring in a market segment that is already seen as offering poor profitability, and has made unambitious profitability forecasts, Kammer said.

Friday’s deep declines have erased a sector-wide rebound during the first half of the week, which had followed the merger between Switzerland’s two largest banks, putting an end to paralyzing uncertainty about the survival of Credit Suisse.

"Investors are clearly jittery," Morningstar European equity strategist Michael Field wrote in a note on Friday. He cites a surprisingly weak German manufacturing purchasing managers’ index (PMI) reading this morning, as a result of which exposure to Germany "is seen as a negative right now."

Despite Deutsche Bank’s ambitious restructuring under CEO Christian Sewing, "there is still some investor scepticism around the quality of the bank. So when banking shares are being beaten up, as they are today, Deutsche will likely take it worse than peers," he said.

Likewise, Kammer says Deutsche Bank’s turnaround is by no means complete. "Poor risk compliance seems to remain a structural issue," he said.

"When potential investors ask themselves which bank definitely won’t have skeletons in the closet, Deutsche Bank won’t be their first pick."

Curiously, the latest sell-off followed a redemption offer by Deutsche Bank for AT2 bonds, usually a gesture that inspires investor confidence. Credit Suisse had attempted a similar maneuver when it announced the Swiss National Bank’s liquidity lifeline on March 16, offering to buy back senior dollar and Euro debt.