Shares in Deutsche Bank were down sharply after a report that the German government won’t intervene with U.S. officials who are pressing the bank to pay US$14 billion to settle an investigation into its sales of mortgage-backed securities. The bank’s shares closed down 7.5% at 10.55 Euros on Monday after the Friday report from Focus magazine.
Focus, which cited “government circles” as its source, also said the government had made it clear the bank would not receive any state bailout. Deutsche Bank said it hasn’t asked for help with the U.S. and isn’t seeking a bailout.
“The question is not on our agenda,” bank said in a statement. “Deutsche Bank is determined to meet its challenges on its own.” The bank has said it expects to pay less than US$14 billion after negotiations.
Deutsche Bank shares have fallen 52% this year as the bank goes through a wrenching restructuring and cost-cutting under CEO John Cryan. Low interest rates have squeezed bank earnings and share prices across Europe. That’s because they reduce the difference between the rates banks pay for money and what they can charge in interest for loans to consumers and businesses.
The possibility of a heavy payout to settle the mortgage issue with the U.S. Justice Department has led to speculation that the bank might need to raise additional capital, a step which can dilute current investors’ shareholding. Deutsche Bank says a capital increase “is currently not on the agenda” and that “we do comply with all regulatory requirements.”
Government spokesman Steffen Seibert said that “there are ongoing talks between Deutsche Bank and the American justice authorities, about which only the negotiating partners can provide information” and said the government declined to take part in “speculation.”
He noted that other banks have settled similar cases with U.S. authorities and that “the government assumes that at the end of this process a fair result will be achieved on the basis of equal treatment”.