Deutsche Bank to pay $7.2b to set­tle US probe

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

Deutsche Bank AG said it has reached a $7.2 bil­lion agree­ment to re­solve a years-long US in­ves­ti­ga­tion into its deal­ings in mort­gage-backed se­cu­ri­ties, re­mov­ing a le­gal hur­dle that fu­eled in­vestor angst.

Deutsche Bank will pay a $3.1 bil­lion civil penalty and pro­vide $4.1 bil­lion in re­lief to con­sumers un­der a set­tle­ment in prin­ci­ple with US au­thor­i­ties, ac­cord­ing to a state­ment early on Fri­day. The fine will cut pre­tax profit by $1.2 bil­lion this quar­ter as the firm taps ex­ist­ing le­gal re­serves to blunt much of that cost. The re­lief may drag on earn­ings for years.

The set­tle­ment “might help in the short run be­cause a ma­jor source of un­cer­tainty has been cleared,” said Michael Huenseler, an in­vestor at Asse­nagon As­set Man­age­ment, which holds about 0.8 per­cent of Deutsche Bank’s shares. “But it’s still higher than many have ex­pected and it will pose a long-term drag on prof­itabil­ity.”

The deal is far be­low the Jus­tice Depart­ment’s ini­tial re­quest of $14 bil­lion, which had spooked stock and bond hold­ers ear­lier this year, rat­tling en­tire mar­kets. Credit Suisse Group AG just hours later an­nounced that it had set­tled a re­lated probe with the DoJ for $5.28 bil­lion.

MA JIAN / FOR CHINA DAILY

The booth of Deutsche Bank AG at an in­dus­try expo in Bei­jing.

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