Deutsche Bank, US in talks

DEUTSCHE Bank is moving closer to settling one of its biggest legal cases. How it manages to pay will depend on whether it can persuade the US to lower its initial request of $14 billion (R198bn), and by how much.

The shares of Germany’s biggest bank plunged on news that the Department of Justice (DOJ) is seeking an amount that is more than twice the €5.5bn (R86.8bn) Deutsche Bank has set aside for litigation.

Aside from the US probe into residential mortgage-backed securities, the lender also faces inquiries into matters including currency manipulation, precious metals trading and billions of dollars in transfers out of Russia.

Reaching a mortgage deal would clear a major hurdle for Deutsche Bank, which has paid more than $9bn in fines and settlements since the start of 2008, according to Bloomberg data. Still, JPMorgan Chase analysts said any agreement exceeding $4bn would raise questions about Deutsche Bank’s capital position.

“Deutsche Bank is going to be looking at other options it has,” said Chris Wheeler, an analyst at Atlantic Equities. “Maybe selling some of the assets it doesn’t want to sell, or maybe it can find further investors.”

The stock fell 8.5 percent in Frankfurt trading, erasing €1.5bn in market capitalisation. The bank’s €1.75bn of 6 percent additional Tier 1 bonds, the first notes that would take losses, fell 5c to 78c on the euro, the biggest drop since the Brexit vote. – Bloomberg