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. “While those views have been largely scaled back, central bank decisions will still be at the front and centre next week”, Bernard Aw of IG said in a commentary.
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In a similar case, rival Goldman Sachs (GS.N) agreed in April to pay US$5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis.
Deutsche Bank previously thought that a settlement between $2 billion and $3 billion would be fair, as it had already paid $1.9 billion in 2013 to resolve similar claims, according to WSJ.
That doesn’t include at least another $1 billion in loan commitments that Deutsche Bank made to Trump-affiliated entities. Their shares also fell 2.8 percent, 2.9 percent and 5.2 percent respectively on Friday. Deutsche Bank still has to deal with a probe of its equities business in Russian Federation and is struggling to sell its German retail lender Deutsche Postbank AG.
US stocks were lower Friday afternoon as the possibility of a $14 billion fine against Deutsche Bank weighed on financial stocks, especially on the big Wall Street banks.
“The negotiations are only just beginning”.
Deutsche Bank later confirmed that the $14 billion figure was an opening bid and that the bank had been invited to submit a counterproposal.
The department declined to comment. The highest so far has been Bank of America’s $16.5 billion in 2014.
Although the US mortgage investigation is gaining most attention, Germany’s largest bank is battling against many other probes relating to activities in Russian Federation and trading issues such as foreign-currency rate manipulation and precious metals trades.
The amount is nearly equal to Deutsche’s market cap.
The news comes at a hard time for Deutsche Bank.
Deutsche was once one of Europe’s most successful players on Wall Street.
Following the report, Deutsche Bank’s stock traded at levels it hasn’t seen since the Brexit vote in late June when the stock bottomed at $12.48. That will force the bank to go for more litigation reserves which it already has more than numerous banks on the Street.
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Even once a deal has been reached, the bank will still have to face New York’s Department of Financial Services (DFS) regulator, which is investigating allegations of money laundering in Deutsche’s Russian arm.
