Deutsche Bank Chairman OR Mr. Deutschescam.

Deutsche Bank Chairman OR  Mr. Deutschescam.

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">Deutsche Bank AG shares fell the most in three years on Friday, indicating that a week of reassuring words from central bankers and politicians failed to alleviate widespread concerns about the financial sector.

As observers attempted to explain the move, Citigroup Inc. analysts suggested it could be due to a "irrational market." While this is a concern in and of itself, it is made even more so by the possibility that negative attitudes will spiral out of control and become a self-fulfilling prophecy.

Mark Branson, the head of Germany's bank regulator BaFin, highlighted this threat this week. While European banking is safe, he told Bloomberg that one issue is "contagion via psychology."

Analysts looking for reasons for the drop in Deutsche Bank shares noted an increase in the lender's credit default swaps, as well as concerns about commercial real-estate exposure and a US Justice Department investigation into banks and Russian sanctions.

"Neither appears significant enough to explain the move," Citi analysts including Andrew Coombs wrote in a note. As with Credit Suisse, they stated that "the risk is if there is a psychological impact from various media headlines on depositors, regardless of whether the initial reasoning behind this was correct or not."

While Deutsche Bank has experienced a number of crises in the past, a massive turnaround plan has assisted it in moving past them. According to the Citi note, Deutsche Bank is profitable and has strong capital and liquidity. Analysts at Autonomous stated that they have "no concerns about Deutsche's viability or asset marks."

As the logo of Deutsche Bank AG sits on the exterior of the bank's offices in Berlin, Germany, a red road traffic light illuminates. Deutsche Bank AG rose in Frankfurt trading after the German lender agreed to sell its insurance business in the United Kingdom for 935 million euros ($1.2 billion), and CEO John Cryan ruled out a capital increase.

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Deutsche Bank shares have lost 21% of their value this year, with the majority of that loss occurring in the last two weeks. This compares to a 7.7% increase in Germany's DAX and a stable Euro Stoxx Bank Index.

According to Ulrich Urbahn, Berenberg's head of multi-asset strategy and research, hedge funds have increased their bets on falling bank stock prices in recent days.

"Investors are attempting to predict which bank will face the next problems — who, for example, is heavily exposed to commercial real estate," Urbahn explained. "The issue is that it has the potential to become a self-fulfilling prophecy." The more people believe banks are in trouble, and the more deposits are withdrawn, the greater the risks for banks."

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