The U.S. -listed shares of Deutsche Bank, the German financial conglomerate, plunged $1.30, or 9%, to $13.46 after the bank said it did not intend to pay the $14 billion settlement that the Department of Justice had proposed. Analysts had expected Deutsche’s penalty to be at the bottom of that range, or even below it. Deutsche, which settled for $1.9 billion with the FHFA in 2013, is indeed likely to pay much less than $14 billion for the sins of its swaggering pomp; but it can ill afford a bigger bill than it bargained for.
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Deutsche Bank gladly told shareholders in July that it planned to close its biggest pending legal cases this year, including one for its sales of residential mortgage-backed securities in the USA before the financial crisis. “The negotiations are only just beginning”, the bank said in a statement (https://www.db.com/newsroom_news/2016/medien/deutsche-bank-confirms-negotiations-with-doj-regarding-rmbs-en-11684.htm).
While traders have all but ruled out the possibility of the Fed raising interest rates at its meeting on Tuesday and Wednesday, residual doubts and questions about when the USA central bank may finally pull the trigger hurt sentiment on Wall Street.
He added RBS is “among a number of European institutions that could face similar claims from the US Department of Justice”.
The Wall Street Journal earlier reported the department’s demands.
Yet, reports say the sales of mortgage securities before the 2008 financial crisis lie at the heart of the case. The fine eventually came in at $7 billion. Goldman Sachs Group Inc. agreed to a $5.1 billion settlement with the US earlier this year, including a $2.4 billion civil penalty and $875 million in cash payments, to resolve USA allegations that it failed to properly vet mortgage-backed securities before selling them to investors as high-quality debt.
Abbey Life, which was bought by Deutsche Bank for ￡977 million in 2007, is valued at about ￡1 billion, sources said.
Shares in Deutsche Bank plunged 8% on Friday morning after the German lender was threatened with a $14bn (£10.6bn) charge by USA for mis-selling mortgage-backed securities in the run-up to the financial crisis. And while the wild market swings continue – as investors gauge whether central banks will continue to support markets at levels of the past – the moves have skewed to the upside after last Friday’s almost 400-point rout.
He said: “RBS could have to pay up to 13 billion United States dollars (£9.8 billion) to settle the claims”. In 2014, Bank of America Corp. Deutsche Bank is down over 8%, while Barclays and Credit Suisse have slipped 5% and 2%, respectively.
Deutsche was once one of Europe’s most successful players on Wall Street. Like many of its peers, it has since faced a slew of lawsuits that often trace back to the boom years before the crash.
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During a conference call in the second quarter of this year in July, Deutsche Bank chief financial officer Marcus Schenck emphasized that his company is committed to “resolve four of its most important highest risk matters including…enforcement matters the DoJ investigations regarding the bank’s pre-financial crisis RMBS business”. Other lawsuits are for the rigging of borrowing benchmarks Libor and Euribor, used to set the price of mortgages and derivatives.
