Deutsche Bank May Reach Faster DoJ Deal on Trump, Barclays Says
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Democractic DoJ officials may be keen to settle before leaving
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RBS may be among lenders put at disadvantage in legal talks
European banks may reach faster, less costly settlements with the U.S. Department of Justice as a result of Donald Trump’s unexpected triumph in the U.S. presidential election, according to Barclays Plc analysts.
”Some Democrat appointments at the DoJ have only a few weeks left before they are replaced,” London-based analysts Mike Harrison and Jeremy Sigee wrote in a note to clients on Friday. ”Accelerating litigation settlements with banks may be one way to end a DoJ tenure with a sense of achievement.”
Europe’s largest lenders are looking to reach settlements with the Justice Department in an investigation into their subprime-era mortgage securities business. At Deutsche Bank AG, Chief Executive Officer John Cryan has been under pressure to reassure investors of the lender’s ability to absorb mounting legal costs after U.S. authorities requested $14 billion to resolve the probe.
European lenders extended gains amid optimism that Trump’s fiscal stimulus plans will boost the global economy and hasten interest-rate hikes in the U.S. Deutsche Bank rose 2.6 percent at 10:52 a.m. in Frankfurt, bringing weekly gains to about 18.4 percent.
Deutsche Bank has spent more than $10.5 billion on fines and legal settlements since the start of 2008, according to calculations by Bloomberg. The company had 5.9 billion euros ($6.4 billion) in reserves at the end of September for legal issues.
While lenders including Deutsche Bank and Credit Suisse Group AG, which are already in negotiations with the Justice Department, may see a faster settlement, others at a more preliminary stage such as Royal Bank of Scotland Group Plc may be at a disadvantage, according to the note. Barclays, UBS Group AG and HSBC Holdings Plc are also among banks still under investigation over their mortgage-backed securities dealings.
A roll-back of red tape for banks may be another upside from a Trump presidency, Barclays said in the note. While the U.S. billionaire has advocated splitting commercial and investment banking, the policies would benefit lenders with pure broker-dealer operations in the U.S. and hurt those with retail and investment banking operations, the analysts wrote.