One day after Deutsche Bank’s US operations failed the Fed’s “stress test”, it appears that this outcome had been priced in by the market as DB’s stock price rose as much as 3% in early Friday trading…

… although looking slightly higher in the capital structure reveals ongoing skepticism, with the yield on DB’s 6% contingent convertibles rising, and set to hit 10% any moment.

However, much to the chagrin of investors in the biggest European lender, the barrage of bad news facing Deutsche Bank is not nearly over, and as the WSJ reports, the sharp drop in DB’s stock price could mean the exit from a major European index, jeopardizing its inclusion in the giant funds that track that benchmark, and assuring new all time lows as mutual fund liquidate their holdings.

The issue is that DB’s share price has dropped by more than 40% this year, as it struggles with falling profitability and other legacies of pre-financial crisis exuberance; the price is so low in fact, it would no longer be included in one of Europe’s most important inidices if there were no changes for the next 2 months.

According to WSJ calculations, Deutsche Bank’s market capitalization has fallen to a level that would see it removed from the Euro Stoxx 50, taking the lender out of the orbit of exchange-traded-funds with €42.5 billion ($49.1 billion) in assets that follow this index.

Still, an expulsion from the index is not assured, as a large bout of buying could save Deutsche Bank’s place in the index when it is rejigged in September, “but its presence in the relegation zone is a dramatic indicator of the once-European banking champion’s fall from grace.”

Some more details on the Stoxx 50, one of the most popular European aggregate indices:

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