Your current subscription does not provide access to this content. If you would like to discuss another topic, look for a relevant article. Its most recent results revealed a 20% fall in second quarter revenues and a 67% drop in profits.
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“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited”, the bank said in a statement.
“Our concern is that this could be just a start, and other European banks could face a similar fate, and this why investors are leaving the boat with respect to the banking sector”, said Aslam.
The possibility of a $USUS14 billion ($A19 billion) fine for Deutsche Bank and a slide in oil prices hit financials and energy stocks, leading major global stock indexes lower.
ANALYST TAKE: Mike van Dulken, Head of Research at Accendo Markets, said a retreat in bank shares was partly to blame for the soft performance in Europe.
And it is not just the nightmare legacy issues that are dragging the bank down, as the prevailing ultra-low interest rate environment continues to crimp the bank’s ability to generate a decent margin between borrowing and lending money. The figure ($14 billion) demanded by the justice department is more than triple the worst case scenario estimate of some analysts.
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 United States before the financial crisis.
Settlement negotiations will now go on for months.
Goldman Sachs settled for $5.1bn in January this year. Other banks which settled recently include Bank of America, Citigroup and JP Morgan.
While promoted as relatively safe, such securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans.
The fine has emerged at a hard time for Deutsche Bank. He has said the bank is determined to clear up its legal problems but has stressed that the matters are not fully in the bank’s control. Privately, Deutsche Bank lawyers have suggested that the bank views between $2 billion and $3 billion as a reasonable cost to close out the Justice Department’s mortgage-related probe quickly, according to people familiar with internal bank discussions and signals communicated to investors. That followed a 6.7 billion-euro loss recorded in 2015.
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The sums paid by some of the nation’s largest banks are meant to offer financial relief to some homeowners.
