Deutsche Bank (DB): No Intention to Settle Claims for “Anywhere Near” $14B, Stock Slammed

Shares of Deutsche Bank AG (DB) were trading down -1.25 or -8.47 percent to $13.51 per share in Friday’s premarket after the U.S. Justice Department asked the German bank to pay $14 billion to settle civil claims stemming from the bank’s involvement in mortgage backed securities. In a statement issued late yesterday, Deutsche Bank expressed that it had no intention of paying that amount. Deutsche Bank AG stock closed at $14.76 per share, up +0.24 or +1.65 percent in Thursday’s regular trading session.

Stock Analysis

Founded in 1870, Frankfurt, Germany based Deutsche Bank AG is a worldwide financial services and banking corporation operating in more than 70 countries and employing over 100,000 people globally.
The bank is one of the world’s largest foreign exchange dealers and is considered one of the most influential and prestigious financial institutions in the world. The company offers clients services such as retail banking, sales, trading, mergers and acquisitions and fund management to name only a few.
Deutsche Bank (DB): No Intention to Settle Claims for “Anywhere Near” $14B, Stock Slammed
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Deutsche Bank has offices in Amsterdam, Bangkok, Belgrade, Dubai, Dublin, Hong Kong, Istanbul, Jakarta, Karachi, Kuala Lumpur, London, Madrid, Manila, Milan, Moscow, Mumbai, New York City, Paris, Pune, Riyadh, São Paulo, Singapore, Sydney, Tokyo, Toronto, Warsaw and Zurich.

In a press release late yesterday after the market close, Deutsche Bank AG confirmed that it had commenced negotiations with the U.S. Justice Department to settle claims in connection with the bank’s issuance and underwriting of mortgage backed securities between 2005 and 2007. The Department of Justice asked for the company to pay $14 billion to settle the civil claims.

The press release stated that, “Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts.”  $14 billion is close to the company’s current market capitalization.

Germany’s largest lender is one of many financial institutions and banks investigated by the Justice Department over the sale of mortgage backed securities, which were promoted as safe investments at the time. The sale of such securities led to the recession of 2007 after the collapse of the housing market and billions of dollars in losses by investors.

A spokeswoman for the German Finance Ministry, Friederike von Tiesenhausen stated that Germany was "aware that U.S. 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.” Asked whether German officials considered the settlement demand as retaliation for the European Commission’s ruling on Ireland giving Apple Inc. (AAPL) €13 billion in illegal tax breaks, Tiesenhausen said that, “I don’t share that assessment”.

The U.S. Justice Department has already settled with Citigroup (C), Bank of America (BAC) and JP Morgan Chase (JPM) over the last two years. The most recent settlement was with Goldman Sachs, which will pay the Justice Department $5 billion to settle claims.

Deutsche Bank stock has been hit hard by the news. The stock is trading just a point off of its yearly low and will most likely test the level in upcoming sessions.

Other News About DB

Cost of insuring Deutsche Bank's debt rises 8 percent after DOJ fine: Markit

The data provider said that credit default swaps on the company’s 5 year senior debt increased +211 bps.

Deutsche Bank nears sale of UK insurance unit to Phoenix Group

Bank is near deal for the sale of Abbey Life Assurance Co to Phoenix Group.

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Published on Sep 16, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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