Deutsche Bank AG (DB)  

​Deutsche Bank Mortgages Securities-Related Fine Could Hit $14 Billion


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Rebecca McClay | FlashRatings | Friday, September 16, 2016 12:55 PM EDT
If the U.S. Justice Department had its way, Deutsche Bank AG (DB) would pay a $14-billion fine for its role in selling mortgage-backed securities that led to a collapse in the U.S. housing market and economy.

The fine amount is the Justice Department’s opening bid to settle civil claims over the German bank’s underwriting and issuance practices between 2005 and 2007. Analysts did not react directly to the proposed figure.

In response, Deutsche Bank released a statement saying it would fight the fine amount with “no intent” to pay it.

“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited,” the bank said. “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.”

Deutsche is among several large financial institutions that have been investigated for deals that provided mortgages to homebuyers with poor credit, leading to mortgage-backed securities that quickly lost investor confidence and led up to the 2008 financial crisis. Goldman Sachs settled with the Justice Department for about $5 billion earlier this year.

Analysts have issued few reports on Deutsche Bank in recent months. In the past 90 days, two analysts have asserted ratings, with Bank of America Merrill Lynch downgrading the stock to “underperform” to “neutral” and JP Morgan downgrading it to “neutral” from “overweight.” In the past year, only 12 percent of analysts have reported positive ratings on DB, with a median price target of $16.50, representing an 18% upside from recent trading prices.