Credit Suisse Nearing U.S. Mortgage Settlement, Reuters Reports

  • Justice Department is said to have sought more than $5 billion
  • Firm is confident it’ll reach deal for less, publication says

A Credit Suisse logo sit on a wall outside Credit Suisse Group AG's headquarters in Zurich.

Photographer: Gianluca Colla/Bloomberg

Credit Suisse Group AG may reach an agreement as soon as this week to settle a U.S. investigation into its handling of mortgage-linked securities before the 2008 financial crisis, Reuters reported.

Switzerland’s second-largest bank is confident it can reach a resolution for less than the $5 billion to $7 billion that the Department of Justice has demanded, the publication quoted an unidentified person familiar with the talks as saying, without specifying when that request was made. Chief Executive Officer Tidjane Thiam met with U.S. Attorney General Loretta Lynch last week, it said.

Spokesmen for the bank and Justice Department declined to comment.

President Barack Obama’s administration has shifted focus to European firms including Deutsche Bank AG as it wraps up a years-long push to hold Wall Street to account for creating and selling subprime mortgage bonds that soured during the crisis. The government already has levied some $46 billion in penalties on six U.S. financial institutions.

“I am relatively relaxed that Credit Suisse can deal with the costs of the pending settlement," said Peter Casanova, an analyst at Kepler Cheuvreux who has a buy rating on the stock. The bank “won’t need to take any particular actions if the amount comes in lower than $4 billion.”

Pulling Back

The bank rose 0.5 percent to 15.53 francs at 9:50 a.m. in Zurich trading. The stock has tumbled 28 percent this year.

Credit Suisse had set aside about 2.1 billion francs ($2 billion) in general litigation provisions by the end of the third quarter. A large settlement could complicate Thiam’s overhaul of the Zurich-based firm. He’s pulling back from investment banking, cutting thousands of jobs this year in New York and London, to free up capital and focus on wealth management.

Still, the amount reportedly sought by the Justice Department is dwarfed by the $14 billion demand authorities made during initial talks with Deutsche Bank, which sent shares of the German firm tumbling this year and forced CEO John Cryan to reassure investors it can reach a cheaper solution. The Frankfurt-based company’s stock is down 22 percent in 2016, after paring much of its decline.

Reuters reported earlier Monday that Deutsche Bank may settle that case as early as Wednesday. A spokesman for the lender declined to comment on the report.

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