Citigroup agreed in 2014 to pay US$7 billion to resolve a United States government investigation into shoddy mortgage-backed securities the bank sold in the run-up to the 2008 financial crisis, capping months of negotiations, during which the government demanded US$12 billion.
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Authorities in the U.S. are seeking as much as $14 billion from Deutsche Bank (LSE: 0H7D.L – news) to resolve allegations stemming from the sale of mortgage securities in the 2008 crisis, the German financial giant confirmed Thursday.
However, nothing is set in stone yet.
USA shares of Deutsche Bank tumbled 5.7 percent to $13.92 in extended trading at 5:52 p.m.in NY.
According to the statement, Deutsche Bank will not settle the potential claims for “anywhere near the number cited”, and that the Justice Department has asked the Bank to make a counter-proposal. “The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts”, Deutsche Bank said. In the mortgage-backed securities matter, the bank is aiming for an amount between $2 billion and $3 billion, according to knowledgeable sources. The settlement included an admission of wrongdoing.
Bank of America (Swiss: BAC.SW – news) in 2014 paid out almost $17 billion in a related enforcement action but federal authorities have faced stinging criticism for failing to hold individuals to account. Goldman Sachs settled for $5.1bn in January this year. The following month, Reuters reported that Wells Fargo reached a $1.2 billion settlement over mortgage fraud allegations.
Earlier Thursday, JPMorgan Chase & Co. analysts wrote in a note to clients that a settlement of about $2.4 billion “would be taken very positively”, but that an agreement exceeding $4 billion would pose questions about the bank’s capital positions and force it to “build additional litigation reserves”.
The Journal also said that lawyers for Germany’s biggest bank “have suggested that the bank views between $US2 billion and $US3 billion as a reasonable cost to close out the Justice Department’s mortgage-related probe quickly”.
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