26-Sep (WSJ) — Deutsche Bank AG shares fell sharply Monday on investor concerns about the German lender’s capital position ahead of an anticipated legal settlement with the U.S. Justice Department.
The shares closed down 7.5% in European trading, at €10.55, their lowest price in decades, according to FactSet. They have declined 53% this year, whittling Deutsche Bank’s market value to $16.4 billion.
European bank stocks broadly fell Monday. The Stoxx Europe 600 Banks index declined 2.3%. The index is down 24% this year.
The Wall Street Journal reported this month that the U.S. Justice Department proposed Deutsche Bank pay $14 billion to settle a set of mortgage-securities investigations. In response to the report, Deutsche Bank said it had no intention of paying “anywhere near” that figure and said that negotiations were just beginning. Investors and analysts expect any settlement ultimately would be much lower than $14 billion.
On Monday, a Deutsche Bank spokesman, Jörg Eigendorf, said the lender is “fundamentally strong” but is suffering from “pure speculation” in the market, which is fueling uncertainty.
PG View: As you know from recent commentary and last week’s Week in Review video, DB is on our radar as a potential crisis flashpoint for the European banking system. Given the interconnectivity in banking today, there is certainly risk to the broader global financial system (ala Lehman Bros) as well.