Deutsche Bank shares slip again in race to reach U.S. settlement

Mon Oct 3, 2016 10:59am EDT
 
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By Georgina Prodhan, Kathrin Jones and Lawrence Delevingne

FRANKFURT (Reuters) - Deutsche Bank (DB.N: Quote) shares resumed falling on Monday after recovering from a record low at the end of last week, as hopes faded of a swift deal with U.S. authorities over a multi-billion dollar penalty.

The German lender is throwing its energies into reaching a settlement before next month's U.S. presidential election, with the Department of Justice demanding a fine of up to $14 billion for mis-selling mortgage-backed securities.

Its shares didn't trade in Germany (DBKGn.DE: Quote) on Monday because of a public holiday, but its U.S.-listed stock was down around 2.8 percent at mid-morning.

The threat of such a large fine has pushed Deutsche shares to record lows, and a cut-price settlement is urgently needed to help restore confidence in Germany's largest lender.

A media report late on Friday that Deutsche and the DOJ were close to agreeing a much lower penalty of $5.4 billion lifted the stock 6 percent higher, but on Monday that report remained unconfirmed.

The Wall Street Journal reported on Sunday that the bank's talks with the DOJ were continuing. Details are in flux, with no deal yet presented to senior decision makers for approval on either side, the paper said, citing people familiar with the matter.

"Clearly, so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry," UniCredit Chief Economist Erik F. Nielsen wrote in a note on Sunday.

Ratings agency Moody's said it would be positive for bondholders if the lender could settle for around $3.1 billion, while a fine as high as $5.7 billion would dent 2016 profitability but not significantly impair the bank's capital position.   Continued...

 
A Deutsche Bank logo adorns a wall at the company's headquarters in Frankfurt, Germany June 9, 2015.   REUTERS/Ralph Orlowski/File Photo