EU banks in trouble? STOXX 50 dumps Deutsche Bank, Credit Suisse


 As STOXX 50 dumps Deutsche Bank, Credit Suisse, both of the European banks are trying to cut back on some of their operation in order to save some resources. What is for the future of Credit Suisse and Deutsche Bank?

August 2, AtoZForex – Earlier last week we have been observing the news of Germany’s largest lender, Deutsche bank, being called the riskiest bank in the world by the International Monetary Fund (IMF) after one of its US businesses has failed the Federal Reserve stress test for two years in a row.

 STOXX 50 dumps Deutsche Bank, Credit Suisse

Currently, Credit Suisse and Deutsche Bank are about to be dropped from the STOXX Europe 50 Index from the beginning of the next week. They will be replaced by technology company ASML Holding and construction company Vinci. The STOXX 50 Index is Europe’s leading Blue-chip index for the Eurozone, operating Deutsche Boerse Group’s index business, stated that these changes will be put into effect on the 8th of August.

 

As the STOXX 50 Index is created to track Europe’s 50 largest firms, the exclusion of Credit Suisse and Deutsche Bank follows a more than 45% collapse of both banks’ shares this year. Currently, Credit Suisse and Deutsche Bank are experiencing the costly restructuring process, which certainly influences their financial status.

Deutsche Bank has made an attempt to simplify its business and cut the costs. Also, it has tried to reduce litigation and fines from poor performance as a part of its strategy started in October last year by John Cryan, the CEO of the bank.

In order to free up resources, Deutsche Bank has cut back on the businesses that require a lot of regulatory capital, such as trading and markets. Unfortunately, this has led to a significant decrease in profits — from €800 million to just €20 million in the Q2 of this year.

Credit Suisse has experienced a quick drop in client activity

As for Credit Suisse, the situation is also not promising, since the Zurich-headquartered bank is also trying to downsize its operations. Moreover, it has experienced a quick drop in client activity and difficult market conditions. Some debts also have influenced the firm’s status in a negative way. However, this week the Credit Suisse has shown a profit of 170 million Swiss francs ($172 million).

See also: Japan Stimulus package approved: Enough to jolt Economy?

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