Deutsche Bank (NYSE: DB) shares tumbled close to 6 percent during early morning trading hours on Monday, after a German magazine called Focus reported that Chancellor Angela Merkel was not ready to mediate in the multinational lender’s dispute with the Department of Justice of the United States.
The drop left the global bank with a market capitalization of just €14.73 billion, which is equivalent to $16.6 billion, by mid-morning. This figure is close to the $14 billion fine that was set by the Department of Justice to pay for
by mid-morning of just €14.73 billion ($16.6 billion), uncomfortably close to the $14 billion fine which the DoJ wants the bank to pay for the alleged mortgage securitization manipulation. Perhaps, what has a greater effect but was given less emphasis is the fact that Chancellor Merkel has also ruled out any financial aid for Deutsche Bank in the “election year 2017.”
The news magazine pointed out that Merkel made her reluctance apparent during her meeting with the CEO of the multinational bank Mr. John Cryan during the summer. The Deutsche Bank CEO had stated that the largest financial institution in Germany could use some diplomatic mediation, yet it was rebuffed.
Market experts believe that the multinational financial services company would find it challenging to survive a massive fine, triggering substantial speculation that the federal government of Germany would not simply watch and allow Deutsche Bank to go bankrupt.
Yet, the initial demand of the US Department of Justice is also subject to negotiation. Moreover, German news reports frequently point to what they consider was a comparable case wherein the Department of Justice set an initial demand of $15 billion from Goldman Sachs. However, the DoJ eventually agreed to a much smaller amount.
Deutsche Bank indicated that when the $14 billion fine first came out during the early part of September, this was the “opening position by the DoJ.” Furthermore, the global bank pointed out that it had been invited by the Department of Justice to give a counter-proposal.
According to the company, “Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited.”
“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 Bank further added.
The multinational financial services firm would not give a statement regarding the news article on Focus.
As of 9:45 AM GMT -4 on September 26, the stock of Deutsche Bank is changing hands at $12.00, down by 5.88 percent or 0.75 points.