Deutsche Bank doesn't intend to pay anywhere near DOJ's $14 billion demand

by Ben Pena September 21, 2016, 1:23

The far bigger-than-expected penalty was levied by the U.S. Department of Justice to settle claims that the German bank missold mortgage-backed securities.

The settlement amount is expected to be less than three times the $14 billion sought by the US government, according to analysts. This past April Goldman Sachs agreed to pay $5.06 billion to settle a claim that it misled bond investors.

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.

European stocks were wrapped up in red Friday, with a selloff in Deutsche Bank AG pacing punishment among bank shares and rounding out what looks set to be a losing week for the market. The stock hit a 52-week low of 11.07 euro following the Brexit vote. The bank has said that it does not intend to settle these claims on the amount mentioned by the Department of Justice.

One analyst pointed out that the market capital of Deutsche Bank was €18bn, so even a third of that US$14bn in settlement would represent a big body blow.

Reaching a mortgage deal would clear a major hurdle for Deutsche Bank, which has paid more than $9 billion in fines and settlements since the start of 2008, according to data compiled by Bloomberg.

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In July, one of Deutsche Bank's United States operations failed a stress test by the Federal Reserve, which it criticised for having "broad and substantial weaknesses" in capital planning and for making insufficient progress on previous year.

This version of the story corrects to clarify U.S. Department of Justice is demanding a $14 billion settlement in talks with Deutsche Bank, but has not yet levied a fine.

Because comparable criminal settlements with other banks have been significantly lower.

Troubled Deutsche has seen profits tumble amid a tough business climate and major restructuring under boss John Cryan - appointed previous year - which has seen thousands of jobs go. Other banks that settled in the last two years include Bank of America, Citigroup and JPMorgan Chase & Co. Its most recent results revealed a 20% fall in second quarter revenues and a 67% drop in profits.

Japan's Nikkei 225 index gained 0.6 percent to 16,508.26 and Australia's S&P ASX 200 added 1.0 percent to 5,295.68.

Proactive Investors meanwhile quoted Accendo Markets as commenting that RBS was "suffering most today because it remains in the firing line stateside for its own RMBS mis-selling and actions in the run-up to the financial crisis".

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