The bank, which has staged a recovery in recent years after a series of crises, said Friday it will redeem a tier 2 subordinated bond early. Such moves are usually intended to give investors confidence in the strength of the balance sheet, though the share price reaction suggests the message isn’t getting through.

“It is a clear case of the market selling first and asking questions later,” said Paul de la Baume, senior market strategist at FlowBank SA. “There continues to be enormous concern that the banking crisis could merge into a heavier risk-off event in markets.”

Deutsche Bank slumped as much as 15%, the biggest decline since the early days of the pandemic in March 2020. It was the worst performer in an index of European bank stocks, which fell as much as 5.7%. Crosstown rival Commerzbank AG, Spain’s Banco de Sabadell SA and France’s Societe Generale SA also saw steep drops.

The widespread declines undermine hopes among authorities that the government-brokered rescue of Credit Suisse Group AG last weekend would stabilize the broader sector. Regulators and executives sought all week to reassure traders about the health of the banking industry. Central banks from the Federal Reserve to the Bank of England this week raised interest rates once again, keeping their focus on inflation amid hopes that the worst of the financial turmoil was past. 

“It seems that the acute phase of the crisis is done,” Standard Chartered Plc Chief Executive Bill Winters said, adding there are still some issues to be addressed.

The latest turmoil for Europe’s banks follows a selloff in US lenders, which tumbled Thursday even after Treasury Secretary Janet Yellen told lawmakers that regulators would be prepared for further steps to protect deposits if needed. 

Banks also slumped as Bloomberg reported that Credit Suisse and UBS Group AG are among lenders under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions.

Amid heightened anxiety in the markets, displays of strength fell flat with investors looking for signs of weakness. Deutsche Bank’s early redemption notice Friday came on the very first day that the lender had the right to announce it. But instead of shoring up confidence in the lender, the cost of insuring its bonds against default jumped.

The cost of insuring Deutsche Bank’s five year senior bonds was quoted at around 220 basis points on Friday morning. While that’s elevated for a major European bank, it’s still a long way off the highs of Credit Suisse last week. The Swiss bank’s 1-year CDS blew out past 3000 basis points at the height of the turmoil.

Earlier this week, UBS offered to buy back bonds that were issued days before it agreed to take over troubled rival Credit Suisse, a deal that sent a gauge of its credit risk soaring. While shareholders have cheered UBS picking up its rival at a very cheap price, its bond prices had dropped in recent days and credit ratings companies have lowered their outlook on the bank’s debt.

Deutsche Bank shares fell 14% at 12:54 p.m. in Frankfurt trading, erasing gains over the past six months. Investors were concerned about its exposure to US commercial real estate and its large derivatives book, according to Stuart Graham, an analyst at Autonomous Research. Yet both are “well known” and “just not very scary,” he added in a note.

The lender recently emerged from a four-year turnaround plan that included thousands of job cuts and an exit from large parts of the investment bank. CEO Christian Sewing, who took over in 2018, even explored a takeover of German rival Commerzbank in 2019 at the urging of the German government, before deciding against such a deal.

“We have no concerns about Deutsche’s viability or asset marks,” Graham wrote. “To be crystal clear – Deutsche is NOT the next Credit Suisse.”