The pummeling was set off by news late Thursday the U.S. Department of Justice asked Deutsche Bank to pay $14 billion to settle civil claims (http://www.marketwatch.com/story/deutsche-bank-rebuffs-14-billion-settlement-demand-in-us-mortgage-probe-2016-09-16) related to mortgage-backed securities.
Advertisement
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.
“The negotiations are only just the beginning”.
USA authorities have accused major banks of misleading investors about the values and quality of complex mortgage-backed securities sold before 2008.
This would be one of the biggest fines ever levied on a bank, exceed the $13bn which JP Morgan paid in 2013 to settle allegations that it misled investors.
Deutsche Bank’s share price dropped as much as 8% this morning.
ANALYST VIEWPOINT: “Added to the mix is uncertainty over the Bank of Japan’s next move”, Bernard Aw of IG said in a commentary.
Deutsche Bank said it “has no intention to settle these potential civil claims anywhere near the figure cited”. The bank ended up paying $7 billion. The Department of Justice has taken a tough stance in settlement negotiations with other banks, requesting sums higher than the eventual fine.
The bank’s USA -listed shares were last down more than 6 percent in extended trading.
The sums paid by some of the nation’s largest banks are meant to offer financial relief to some homeowners.
“A hefty settlement would be bad news for a clutch of big European lenders who also face potential penalties or litigation in connection with a U.S. crackdown on the selling and packaging of residential mortgage-backed securities before 2008”, the newspaper said. The bank’s total market value is only €16.7 billion. Its litigation bill since 2012 has already hit more than 12 billion euros.
Advertisement
Bond prices were little changed. Its chief executive John Cryan has been restructuring the business to cope. These are the mortgages and FX cases, an investigation into suspicious equities trades in Russian Federation and allegations of money laundering.
