The yield on 10-year Treasury notes was little changed at 1.69 per cent, poised to end the week higher by three basis points.
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But in a quick reaction, Deutsche Bank rejected the $14 billion figure, which the bank said was an opening proposal in settlement talks with U.S. prosecutors.
Shares of Deutsche Bank fell almost 7 per cent in early trading today.
Deutsche Bank chief executive officer John Cryan, 55, has struggled to boost profits as unresolved legal probes and claims compound concerns that the lender will be forced to raise capital or sell assets.
In 2014, it asked Citigroup to pay US$12 billion to resolve an investigation into the sale of shoddy mortgage-backed securities, sources said.
German Finance Ministry spokeswoman Friederike von Tiesenhausen said Germany was “aware that USA authorities have agreed with other banks on settlement payments, and so the German government assumes that a fair result will be reached at the end of this process as well, on the basis of equal treatment”.
The German bank also on Thursday confirmed that it has started negotiations with the U.S. department of justice to settle the civil rights, which will raise the DoJ possibility of the issue and placement of mortgage-backed securities (RMBS) and related securitisation transactions by the bank between 2005 and 2007.
Deutsche Bank’s shares stumbled 8.5%, wiping off roughly €1.5 billion from the German lenders’ market capitalization. It only has 5.5 billion set aside.
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. “While those views have been largely scaled back, central bank decisions will still be at the front and center next week”, Bernard Aw of IG said in a commentary.
American banks have settled with the department for amounts between $3.2 billion (Morgan Stanley) and $16.7 billion (Bank of America), as well as paying smaller sums to the Federal Housing Finance Agency (FHFA), another regulator. Chief Executive Officer John Cryan, who took over past year, already suspended the dividend to preserve capital and has repeatedly ruled out tapping investors.
Justice Department spokesman Peter Carr declined to comment on the negotiations. This could mean that the bank might be required to boost legal matters provisions, which now stand at around $6 billion.
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 U.S. before the financial crisis.
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Settlement negotiations will now go on for months. “But of course, $5.0 billion is still painful”.
