Banking shares across Europe hit by Deutsche Bank settlement proposals

by Ben Pena October 1, 2016, 6:56
Banking shares across Europe hit by Deutsche Bank settlement proposals

Last year, USA market regulators fined the German lender $55 million, concluding that it had overvalued its holdings of credit derivatives by at least $15 billion during the financial crisis.

The Department of Justice has taken a tough stance in settlement negotiations with other banks, requesting sums higher than the eventual fine. Federal regulators have been looking to settle with Deutsche Bank, as it has done with the other major Wall Street firms like Goldman Sachs and JPMorgan Chase & Co., for its role in the mortgage bubble and financial crisis.

Wall Street was near session lows late on Friday morning as Oracle led a decline in tech stocks and financials came under pressure in the wake of Deutsche Bank's mammoth $14-billion fine. Net income decreased to €18 million (£15m) from €796 million a year earlier, Deutsche Bank announced in July.

DEUTSCHE BANK: Shares in Deutsche Bank AG plunged after the company said it did not intend to pay the $14 billion proposed by the U.S. Department of Justice to settle civil claims.

NEW NEIGHBORS: The S&P 500 is adding a new industry to its traditional groups for the first time since the dotcom era.

In 2014, the DoJ asked Citigroup to pay $12bn after an investigation into the sale of mortgage-backed securities, sources said. USA benchmarks appeared to be headed for a slow start, with both Dow and S&P 500 futures down 0.2 percent.

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"Even if Deutsche Bank eventually manages to lower the amount to $5 billion, that alone would eat up most litigation reserves", according to Dieter Hein, an analyst at Fairesearch, an independent research house.

On news of the filing today, Deutsche was quick to respond that it had no intention to settle these potential claims anywhere near that figure.

We rate DEUTSCHE BANK AG as a Sell with a ratings score of D. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more hard for investors to achieve positive results compared to most of the stocks we cover. While promoted as relatively safe, the residential mortgage-backed securities (RMBS) that were packaged into bonds were unlikely to be able to repay their loans.

OIL PRICES: Benchmark U.S. crude lost 53 cents to $43.38 per barrel in electronic trading on the New York Mercantile Exchange. Moreover, at the bank's annual shareholder meeting in May, Deutsche Bank CEO John Cryan outlined his expectation of a significant legal bill in 2016.

Deutsche Bank to fight $14 billion demand from United States authorities was posted in Business of TheNews International - on September 18, 2016 and was last updated on September 18, 2016.

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