Deutsche Bank's settlement will comprise a different list of recipients, a source close to the matter said, adding that the lender had already settled some claims three years ago.
Deutsche Bank has no intention of paying a $14 billion settlement
fine issued by US authorities over claims it missold mortgage-backed
securities, the bank said in a statement amid growing concerns over its
The US Justice Department has opened settlement negotiations with
Germany’s largest bank over its role in selling residential
mortgage-backed securities prior to the 2008 financial crisis. Deutsche
Bank confirmed the settlement amount on Thursday, but indicated that it
has “no intent” to pay “anywhere near the number cited,” the bank said.
On Friday, Deutsche Bank’s stock price plunged 8.5%, wiping out more
than $1.1 billion in market value. By the end of the day, Germany’s DAX
Index had lost 1.5%. Deutsche Bank’s shares have lost around half of
their value this year. The bank barely passed European stress tests in
July, raising concerns about its financial position.
The bank employs approximately 100,000 people.
Germany’s Finance Ministry commented on Friday it expects a “fair
result” from the negotiations, but indicated it would not interfere with
the talks. Finance minister Wolfgang Schaeuble had earlier voiced
public support for the bank.
“The negotiations are only the beginning. 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.
According to analysts, even a fine at a fraction of that amount would
threaten Deutsche Bank’s capital position. In 2014 the Justice
Department ordered Citigroup to pay $12 billion to resolve a settlement
related to its mortgage-backed securities business. The fine was
eventually settled at $7 billion. This past April Goldman Sachs agreed
to pay $5.06 billion to settle a claim that it misled bond investors.
Deutsche Bank’s attempt to negotiate a lower settlement will likely
trigger several months of talks, which could further erode its share
price. Analysts expect the bank to fork over anywhere between $4-$7
billion once the final settlement is reached.