Deutsche Bank: Pressure eases as US fine looks smaller

Fine on selling toxic debt will be $5.4b against earlier $14b

NEW YORK: Heavy market pressure on Deutsche Bank eased on Friday as a knowledgeable source said the US fine over toxic debt it sold would be only $5.4 billion, not the $14 billion originally demanded.

A person familiar with the talks between Deutsche Bank and the Department of Justice said an agreement could come in the next few days to settle the US government charges that the bank knowingly sold high-risk mortgage securities ahead of the 2008 financial crisis.

The final amount of the settlement could also be slightly different. The news powered the shares of Germany’s biggest lender dramatically higher as worries about its financial stability under the pressure of a potentially massive US fine ebbed.

US-traded shares of the bank finished up 14% at $13.09, while in Frankfurt, in part due to different market hours relative to the timing of the news, shares added 6.4% at 11.57 euros. Deutsche Bank and the Justice Department declined to comment on the news of a deal, as did the German finance ministry.

But worries about the impact of the case on Deutsche Bank had spread through markets and into the political realm over the past week, unnerving investors.

Adding to the rising concerns were conflicting reports in German media on whether Berlin would come to the troubled bank’s aid if necessary.

Deutsche Bank Chief Executive John Cryan managed to lift the mood with a letter to staff on Friday insisting the bank was not at risk. “At no time in the last two decades has Deutsche Bank been as safe as it is today,” Cryan wrote.

“In a situation like this, the most important factor is our liquidity reserves. Currently, they still amount to more than 215 billion euros ($241.7 billion),” he said.

Published in The Express Tribune, October 2^nd, 2016.

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