Deutsche Bank AG’s provisions for fines related to the alleged manipulation of Libor are probably at least $500 million short, analyst estimates show.
Germany’s largest lender has set aside about $1.03 billion for sanctions stemming from international investigations into the bank’s role in rigging the London interbank offered rate, a key interest-rate benchmark, according to a survey of seven analysts. The lowest estimated provision in the survey was $750 million, while the highest was $1.2 billion.
The Frankfurt-based company is approaching a settlement with U.S. and U.K. regulators seeking a total fine of at least $1.5 billion, one person familiar with the matter said last week. The penalty would be larger than those paid by any of the other seven banks that have settled with the U.S. and U.K. over Libor.
“The need for additional provisions is certainly manageable,” said Dieter Hein, a Kronberg, Germany-based analyst at Fairesearch/AlphaValue, who has a reduce recommendation on the stock. An additional charge “wouldn’t really be that significant if you compare it with what they’ve paid for litigation in the past.”
Deutsche Bank set aside 3.2 billion euros ($3.4 billion) in legal reserves at the end of December, the firm said in a presentation on Jan. 29. The bank doesn’t provide details on the reserves. Over the last three years, the company’s litigation expenses totaled about 7.1 billion euros.
A spokesman for Deutsche Bank in Frankfurt declined to comment. Germany’s daily newspaper Handelsblatt earlier on Monday reported the bank provisioned slightly more than 1 billion euros for Libor and that no members of management will leave as a result of the settlement, without naming sources.
Deutsche Bank still faces probes into foreign exchange, mortgage- and asset-backed securities and precious metals dealings, and is also under investigation for alleged U.S. sanctions violations, according to the company’s 2014 annual report. The bank is in the midst of reviewing its strategic options, which may include selling its consumer banking arm, as it seeks to boost returns, a person familiar with the plan said last month.
The penalty said to be under discussion for Deutsche Bank would exceed the previous record Libor fine given to UBS Group AG, which was levied $1.5 billion in 2012.