One factor in Deutsche Bank executives’ thinking is that the lender already paid $1.9 billion in 2013 to settle some USA claims tied to mortgage-backed securities, some of the people said. In April a year ago, Deutsche Bank paid US$2.5bn to settle American and British charges that it had manipulated the London Interbank Offered Rate, or Libor, affecting commercial interest rates.
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U.S. stocks fell on Friday as the possibility of a $14 billion fine against Deutsche Bank weighed on big banks and investors wrestled with lingering uncertainty about when the U.S. Federal Reserve will hike interest rates.
“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited”, the bank said.
Odd as it may seem, that’s actually not such a bad negotiating position to be in for Deutsche Bank.
In Europe, shares closed at six-week lows on concerns on weakness in financials led by Deutsche Bank.
Germany’s Finance Ministry commented on Friday it expects a “fair result” from the negotiations, but indicated it would not interfere with the talks.
Analysts remain bearish on RBS, with Deutsche Bank reiterating its “sell” stance on the stock yesterday, without specifying a price target on the stock.
One of Deutsche’s top 10 investors said he expected the bank to have to pay 4-5.5 billion euros for the mortgages case. Other European lenders probed in relation to residential mortgage-backed securities also declined, with UBS Group AG down 2.9% and Credit Suisse Group AG slipping 5.2%.
It seems like it’s soon to be Deutsche Bank’s (NYSE: DB) turn on the regulatory wheel of punishment. “But because of the election campaign it may end up higher – at maybe 6 or 7 billion”.
Nevertheless, investors appear to be banking on the fact that whatever settlement the bank pays will be large as evidence by not only Deutsche Bank’s stock decline but many of its European peers.
Deutsche Bank booked an nearly 7 billion-euro loss in 2015, and its May annual general meeting saw shareholders berate managers for their performance. Other lawsuits are for the rigging of borrowing benchmarks Libor and Euribor, used to set the price of mortgages and derivatives.
Since he took over a year ago, John Cryan, Deutsche’s chief executive, has said he aims to settle major outstanding legal issues as soon as possible as part of his wider overhaul.
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In Asia, where trade was thin due to public holidays, Tokyo ended 0.7 percent higher, while Sydney jumped one percent, Singapore also added 0.7 percent and Wellington climbed 0.8 percent.
