Commerzbank Said to Near $1.4 Billion U.S. Settlement

Commerzbank AG, Germany’s second-largest lender, will pay at least $1.4 billion to settle federal and state claims that it violated U.S. sanctions, a person briefed on the matter said.

The settlement, part of a deferred-prosecution agreement that would also resolve a separate money-laundering matter, may come as soon as this month, said the person, who asked not to be identified because the discussions aren’t public.

“It’s good that they’re reaching a settlement, but it’s a frightening ending,” said Ingo Frommen, an analyst with Landesbank Baden-Wuerttemberg in Stuttgart, Germany, who recommends investors hold the stock. “That would have been money that Commerzbank urgently needed as retained profits to strengthen capital ratios.”

Commerzbank fell 0.5 percent to 11.70 euros at 9:25 a.m. in Frankfurt, while the STOXX Europe 600 Banks Index rose 0.2 percent.

The accord is the latest settlement with a global bank over dealings with blacklisted countries, including Iran and Sudan. In June, BNP Paribas SA pleaded guilty to violating U.S. sanctions laws and agreed to pay a record $8.9 billion to resolve the case.

Commerzbank will pay at least a combined $1.4 billion to the Justice Department, the U.S. Attorney for the Southern District of New York, the Federal Reserve, the Manhattan district attorney’s office and New York’s Department of Financial Services, the person said.

The bank added 484 million euros ($533 million) to its legal provisions in 2014, the lender said when releasing fourth-quarter results in February. The bank earmarked 934 million euros for legal costs at the end of 2013, according to its filings. Updated figures for legal provisions are expected with the company’s annual report, due at the end of March.

Duncan King, a spokesman for Commerzbank, declined to comment.

The U.S. has brought at least 22 cases against financial firms since 2009 for doing business or handling funds linked to sanctioned countries, according to announcements on government websites.

Commerzbank has previously been accused of running afoul of U.S. sanctions. In 2011, the bank agreed to pay $175,500 over claims it violated Cuban asset-control regulations in 2005.

The German federal government still has a 17 percent holding in Commerzbank after bailing it out in 2009 in the wake of the financial crisis. Commerzbank completed a fifth capital increase in four years in May 2013 to help repay the government and bolster capital.

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