Following a rough year for Deutsche Bank (DE:DBKGn) in relation to a series of bond packaged select mortgages allegations and an initial heavy fine from the US Justice Department, the German bank has now reached a deal to pay $7.2 billion to the Justice Department in settlement of the cases filed against the company.
The bank was initially fined $14 billion last year leading to a drop in their shares as the bank was only holding around $6.5 billion in cash reserves to be used for their litigation cases. Deutsche Bank shares then declined by as much as 7.%% as investors raised their concern to how the bank will be able to settle the claims without going bankrupt.
The fine which is composed of a civil penalty fine worth $3.1 billion and another $4.1 billion for the homeowners, communities, and borrowers in relief. Aside from the $7.2 billion fine, the bank is also set to release a statement saying that Deutsche Bank made false and misleading offers to their clients regarding billion dollar loans worth of mortgages given by the bank during the financial crisis back in 2007.
DBK Under Close Scrutiny
Currently, the bank is still under investigation over other allegations such as foreign-currency rate and metal price manipulation claims and accusations from the Russian central bank of trades worth $4.87 billion that an ex-employee reportedly placed with family members.
Although the final fine from the Justice Department was half of the initial fine imposed by the government department, the bank currently holds €5.9 billion or $6.3 billion in litigation reserves, the bank announced that they intend to hold cuts including the bonuses of their senior employees less by 90% in their efforts to pay the fine.
US Department Justice Attorney General Loretta Lynch said in a statement that the German bank did not also mislead and deceive their clients but also added a cause to the 2007 global financial crisis.
DBK Shares Slides By 0.40%
During early Wednesday trading following the finalization of the $7.2 billion fine, shares of the banking company slid to around 0.8% to as much as 0.40% closing down 3.23% at the end of the trading session to 17.51 in Frankfurt and $18.56 on the New York Stock Exchange.
CEO John Cryan acknowledged the weight of the fine in a letter to Deutsche Bank employees but added that the matter is coming to a close.
The bank then also announced that its fourth quarter earnings report would be $1.17 billion less due to the pre-tax charges although they also stated that they do not expect it to have a significant effect on their upcoming earnings report this February 3.
Deutsche Bank is currently in the middle of a plan to bring small and medium sized business in the global trade along with other banks including Unicredit (LON:0Q54), Keybridge Capital Ltd (AX:KBC), Natixis (PA:CNAT), Rabobank, HSBC Holdings (LON:HSBA) PLC (NYSE:HSBC), and Societe Generale (PA:SOGN).