Germany’s biggest lender saw shares plunge as the United States department for Justice filed a huge US$14bn (£10.6bn) claim against it to settle its investigation into the bank’s selling of what’s called mortgage-backed securities.
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DEUTSCHE BANK: The U.S. -listed shares of Deutsche Bank, the German financial conglomerate, plunged $1.36, or 9 percent, to $13.39 after the bank said it did not intend to pay the $14 billion settlement that the Department of Justice had proposed.
The bank, however, said it will in no way accept this potential civil claims at a level that even approximately equal to the said number.
Deutsche Bank is facing a host of problems as it moves to meet tougher regulatory requirements, cut costs and settle several legal investigations. Among those were Commerzbank, which was down 3 percent and Royal Bank of Scotland, which fell by 5.3 percent.
USA authorities have accused major banks of misleading investors about the values and quality of complex mortgage-backed securities sold before 2008. For instance, Citigroup was initially asked to pay a fine of $12 billion but eventually paid $7 billion.
JPM expects RBS to provision an additional $4.2 billion by the end of 2017, to cover a series of litigation and conduct issues which may include settlement of a US style class action brought by investors who claim they were misled about the bank’s financial health at the time of its rights issue in spring 2008.
The $US14 billion settlement is “preliminary” at this stage and “Deutsche Bank is expected to push back strongly against it”, the Wall Street Journal said. The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007 as the housing market collapsed and investors suffered billions in losses. Its shares have already fallen by 50% over the a year ago. Bank stocks across the region fell in Deutsche’s slipstream. In 2014, Bank of America Corp. agreed to pay $16.7 billion in penalties to settle similar charges.
“RBS needs to defend its interests vigorously and not let DoJ dictate the terms to them”, he said.
The U.S authorities have claimed billions of dollars from banks tied with RMBS misconduct.
Deutsche Bank lost around 39% on the NYSE, year to date, reflecting investors’ concern over the bank’s growth prospects.
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In July Deutsche Bank posted a 98 percent year-on-year drop in second-quarter profits, with net earnings recorded at only $22 million, which Cryan, the bank’s chief, attributed to “sustained restructuring”.
