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.
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.
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.
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