Stocks fell in early trading in Europe on Friday, led by banks as Deutsche Bank shares tumbled following news the U.S. Justice Department is seeking a $14 billion settlement over its dealings in mortgage-backed securities before the 2008 financial crisis.
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MILAN/LONDON, Sept 16 (Reuters) – European shares ended at six-week lows on Friday, with Deutsche Bank dragging banking stocks lower after it said that the USA government is demanding billions of dollars to settle a mortgages case.
As he fights legal challenges on multiple fronts, Cryan has also vowed to press through an ambitious restructuring of the lender, slashing 200 branches in Germany alone and 9,000 jobs worldwide.
“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited”, the company said in a statement early on Friday in Frankfurt.
“The negotiations are just beginning”.
Shares in Deutsche Bank AG plunged Friday, Sept. 16, 2016, after the revelation that the U.S. Department of Justice is seeking United States dollar 14 billion to settle civil claims over its handing of residential mortgage-backed securities.
If the lender can’t get the Justice Department to significantly reduce the fine, then it has a problem.
Bank of America paid $16.7 bn in the same year to settle similar charges.
In 2014, the DoJ asked Citigroup C.N to pay $12 billion to resolve an investigation into the sale of shoddy mortgage-backed securities, sources said. The DOJ made no public comment on these negotiations.
Much of the underlying lending was worthless or fraudulent, delivering billions of dollars in losses to bond holders when the housing market collapsed, bringing down numerous banks and touching off the worst United States recession since the 1930s.
The government has accused the banks of misleading investors about the quality of their loans.
The blue-chip FTSE 100 index .FTSE closed down 0.3 percent at 6,710.28 points, posting a loss of around 1 percent over the week. Goldman Sachs (GS) also took a $5 billion hit, although only half of that was cash, the rest being so-called consumer relief.
While it is yet to become clear what the final payment will be, if it were to be as high as US$14 billion, this would be a severe strain for Deutsche’s fragile finances and would likely further rock investor confidence in the bank.
In addition to the USA mortgage investigation, Deutsche Bank faces litigation and regulatory probes relating to issues such as foreign-currency rate manipulation and precious metals trading.
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“RBS needs to defend its interests vigorously and not let DoJ dictate the terms to them”, he said. “It’s good that Deutsche Bank is pushing back”.
