Deutsche Bank AG is poised to settle U.S. and U.K. investigations into rigging of benchmark interest rates for about 2 billion euros ($2.14 billion), according to a person briefed on the matter.
New York's Department of Financial Services also may install a monitor at the bank to oversee its compliance with the settlements to be announced as soon as today according to the person, who asked not to be identified because the talks were private. The Frankfurt-based firm said Wednesday it will log 1.5 billion euros in litigation costs in the first quarter.
While the fine may be the largest yet for alleged interest-rate rigging, the bank said it still expects to report a profit for the first quarter and near-record revenue. A settlement would remove a legal threat that has loomed over Anshu Jain's three-year tenure as co-chief executive officer.
"It looks like Deutsche Bank must have had an excellent quarter in terms of underlying earnings," said Dirk Becker, a Frankfurt-based analyst at Kepler Cheuvreux who recommends investors buy the lender's shares. "Litigation charges are not a surprise: The question is how much more litigation costs will be coming."
Deutsche Bank rose 0.4 percent to 31.55 euros at 11:00 a.m. in Frankfurt trading, valuing the company at 43.5 billion euros. The shares have gained 26 percent this year, outpacing the 14 percent advance of the 45-company Bloomberg Europe Banks & Financial Services Index.
"We continue to work with the authorities that are reviewing interbank offered rates matters," said Renee Calabro, a Deutsche Bank spokeswoman in New York. The company is scheduled to release earnings on April 29.
The penalty would top UBS Group AG's $1.5 billion settlement to rank as the largest levied in the long-running, industrywide investigation into rigging of interest-rate benchmarks including the London interbank offered rate. About a dozen firms already have paid a combined $6.5 billion since the first deal with Barclays Plc in June 2012. Deutsche Bank has already paid 725 million euros to settle a European Union antitrust investigation in connection with the manipulation.
The settlement comes as the firm reviews whether to exit all or part of its consumer-banking operation as part of a wider strategic overhaul that may be announced in coming days. The supervisory board meets Friday and may discuss the overhaul then, according to a person with knowledge of the matter.
Deutsche Bank's announcement is "positive" because of strong operating earnings and the Libor case "potentially nearing settlement even if at a higher cost than expected," JPMorgan Chase & Co. analysts Kian Abouhossein and Amit Ranjan wrote in a note to clients Wednesday. They said not all of the litigation costs the bank is taking in the quarter may be for Libor.
Deutsche Bank had set aside 3.2 billion euros in legal reserves at the end of December, the firm said on Jan. 29.
Litigation may cost the bank some 4.5 billion euros over the next three years to cover investigations over Libor, foreign-exchange market manipulation and the U.S. probe related to mortgages, Morgan Stanley analyst Huw van Steenis said in a note Thursday.
