Deutsche Bank, Credit Suisse agree multi-billion dollar settlements with DoJ

Deutsche Bank rallied on Friday after it settled allegations with the US Department of Justice of mis-selling mortgage-backed securities between 2005 and 2007.

The bank has agreed to pay a $7.2bn fine, which is significantly lower than the $14bn that had been expected. The fine includes a $3.1bn penalty and $4.1bn in consumer relief in the US.

The consumer relief is expected to be primarily in the form of loan modifications and other assistance to homeowners and borrowers, and other similar initiatives to be determined, and delivered over a period of at least five years.

Deutsche Bank said it expects to record pre-tax charges of about $1.17bn in the financial results for the fourth quarter as a consequence of the civil monetary penalty. It added that the financial consequences, if any, of the consumer relief are subject to the final terms of the settlement, and are not currently expected to have a material impact on 2016 results.

Meanwhile, Credit Suisse agreed to pay US authorities $5.3bn to resolve claims over the mis-selling of mortgage-backed securities in the run-up to the financial crisis, which was more than the $2bn fine analysts had been expecting.

The Swiss bank will pay the DoJ a civil monetary penalty of $2.48bn and provide consumer relief of $ 2.8bn over the course of five years following the settlement.

The bank said it will take a pre-tax charge of approximately $2bn in addition to its existing reserves against these matters in its fourth-quarter 2016 results.

At 0930 GMT, DB shares were up 3.5% to €18.36 while Credit Suisse was down 0.3% to CHF15.29.