Deutsche Bank has vowed to fight a massive demand from the US Department of Justice.
Point of view
The negotiations are only just beginning
The DoJ wants $14 billion (12.48 billion euros) to settle claims that Germany’s biggest bank mis-sold mortgage-backed securities.
This dates back to the sub-prime scandal that led to the 2008 financial crisis and recession that followed.
As its shares tumbled as much as eight percent on Friday, Deutsche Bank said it expected to negotiate the final bill down to a much lower amount.
“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited,” it said in a statement.
“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.”
On the floor of the Frankfurt stock exchange, analyst Robert Halver with Baader Bank said: “Deutsche Bank can’t pay $14 billion. It only has 5.5 billion set aside. But I’m sure in the end it won’t be that high. Because comparable criminal settlements with other banks have been significantly lower. I reckon about five billion, which is bad enough. But the problem is it’s facing other criminal trials, and they will also cost money.”
The US Department of Justice has repeatedly demanded amounts higher than the eventual fine with other banks but this far exceeded the bank’s expectations that the DoJ would be looking for a figure of only up to three billion euros ($3.4 billion).
Settlement negotiations will now go on for months.
Bank shares across Europe slumped on Friday as a big settlement would be bad news for other European financial institutions accused of similar crimes.
Globally bank shares were on course for a weekly loss of more than six percent, their biggest since Britain’s vote in June to leave the European Union.