Frankfurt: Deutsche Bank will be free to focus on a new growth strategy instead of devoting most of its energy to cleaning up past mistakes, chief executive John Cryan said after settling its most costly legal headache.
“Given other lawsuits, it is still too early to talk of having drawn a line under all matters,” Cryan said in a message to the company’s around 100,000 employees on Wednesday.
“We are, however, nearing our objective of being able to concentrate primarily on the future instead of repeatedly having to look over our shoulders at past events.”
Germany’s biggest bank on Tuesday finalised a $7.2 billion (Dh26.44 billion) settlement with the US Department of Justice (DoJ) over its sale of toxic mortgage securities in the run-up to the 2008 financial crisis.
Combined with an earlier $1.9 billion settlement with US government-controlled Fannie Mae and Freddie Mac, America’s biggest providers of housing finance, the total bill for the mortgages issue stands at $9.1 billion.
Deutsche agreed with the DoJ to a statement of facts that describes how it made false and misleading representations to investors about the loans underlying billions of dollars worth of mortgage securities it issued in 2006 and 2007.
“Ultimately, Deutsche Bank enriched itself by paying reduced prices for risky loans while representing to investors valuation metrics based on appraisals the bank knew to be inflated,” the statement said.
With the US mortgages case out of the way, three main litigation cases remain — a probe into suspicious equity trades in Russia, investigations into alleged foreign exchange manipulations and alleged US sanctions violations.
All three are expected to result in manageable costs.
The bank remains hopeful of reaching a deal on Russia by March and booking the case retroactively in its 2016 accounts while paying significantly less than the €1 billion ($1.07 billion; Dh3.91 billion) it has provisioned, people close to the bank have said.
Breathing space
The mortgages settlement gives Deutsche Bank breathing space to refine its strategy, with an update likely to be presented to investors in spring and after an expected accord of international banking supervisors on new capital rules.
Regulators had planned to strike a deal on the future capital rules — dubbed Basel IV — by early January, but have now postponed a decision until March as they struggle to find a compromise between European and American interests.
The capital rules will determine whether Deutsche Bank can afford to reintegrate its retail unit Postbank, which it had put up for sale to lift its capital ratios, but would prefer to keep, the people close to the bank said.
Separately, Deutsche Bank is expected to outline a slimmer approach in its core investment banking unit, which focused on rapid expansion since the 1990s, but paid too little attention to the complexity it added, and the conduct of some of its employees.
While Deutsche will continue to be more selective in its product offering and choosing its clients, deeper cuts, such as a retreat from the United States, are not on the agenda, the sources said.
“The general view is that the worst point in investment banking is behind us and that it would be stupid to cut back significantly now. The prospects for investment banking are improving, partly because of the program of the new US.
President Trump,” one of the people said.
Ex-traders in Singapore guilty of cheating Deutsche Bank, HSBC
Singapore: Two former currency traders from Deutsche Bank AG and HSBC Holdings Plc were convicted of cheating the banks by making false trades.
Former HSBC senior dealer Ivan Chng and ex-Deutsche Bank trader Toh Hway Khuan pleaded guilty in separate hearings in Singapore’s High Court on Wednesday.
The men both admitted to using their banks’ accounts in 2009 to get preferential rates on the dollar. The cases are unrelated and the men will be sentenced at a later date.
Chng, 48, was charged in 2015 with 149 counts of buying and selling about $800 million and unlawfully making about S$230,000 ($160,000). He pleaded guilty to 25 of the charges. Toh, 51, was also charged in 2015, with 39 counts of buying and selling more than $250 million and unlawfully making about S$140,000.
The duo’s trades were a deception and were to the detriment of the banks, prosecutors said in court. Prosecutors sought a three-month jail term for Toh and six months for Chng to deter those in the financial industry from making personal gains through deceitful means. Both men failed to disclose their beneficial ownership in the trades, and their offences were difficult to detect, prosecutors said in court.
— Bloomberg
