Deutsche Bank AG (DBK) will pay 1.4 billion euros ($1.9 billion) to settle claims it didn't provide adequate disclosure about mortgage-backed securities sold to Fannie Mae (FNMA) and Freddie Mac (FMCC).
The agreement with the Federal Housing Finance Agency covering the period 2005 to 2007 resolves Deutsche Bank's largest mortgage-related litigation case, the Frankfurt-based company said in a statement on its website today.
Europe's biggest investment bank by revenue is grappling with legal issues stretching from the U.S. housing market to the alleged manipulation of benchmark interest rates. The settlement follows similar agreements UBS AG and JPMorgan Chase & Co Inc. struck with U.S. regulators for mortgage-backed debt sold during the country's housing bubble.
"Investors want to see legal problems being dealt with," Stefan Bongardt, an analyst with Independent Research GmbH in Frankfurt who has a hold recommendation on the stock, said by telephone. "The sum is slightly higher than we expected, but it is better to get these kind of things out of the way rather than spend months haggling over a few hundred million."
Deutsche Bank's shares rose 0.8 percent to 33.80 euros at 2:33 p.m. in Frankfurt, valuing the company at 34.5 billion euros.
The settlement is "substantially reflected" in funds set aside for legal costs and "no material additional" reserves are necessary in this case, Deutsche Bank said. The company increased reserves for litigation expenses by 1.2 billion euros to 4.1 billion euros at the end of September from June.
Banks may pay a total $27 billion to settle lawsuits with the Federal Housing Finance Agency, according to data and company filings compiled by Bloomberg last month.