Deutsche Bank, Credit Suisse agree billion-dollar settlements in US

Deutsche Bank and Credit Suisse said Friday they had agreed with US authorities to pay billions of dollars to settle probes into the sales of toxic mortgage bonds that contributed to the 2008 financial crisis.

The German lender will pay a total of $7.2 billion -- a $3.1-billion fine and $4.1 billion in relief to consumers -- as part of the long-sought agreement in principle with US authorities, it said.

Shares in the German banking giant rose on the Frankfurt stock exchange on the heels of the announcement, which analysts said was a good outcome for now.

"With this settlement, CEO John Cryan has given himself and Deutsche Bank a Christmas present," said LBBW bank's Ingo Frommen.

In September, the US Department of Justice had sought an unaffordable $14-billion fine from Deutsche, sparking fears the bank could collapse and destabilise the global financial system.

Hours after the deal was announced on Friday, Credit Suisse said it too had struck an agreement with US authorities to pay almost $5.3 billion to settle a similar dispute over subprime mortgage bonds.

A day earlier, the DoJ revealed it was suing British financial giant Barclays, accusing the bank of massive fraud in the sale of mortgage-backed securities in the US.

The rash of announcements comes as President Barack Obama's outgoing administration is racing to finish investigations into the Wall Street firms that created and sold the risky mortgage bonds that led to the worst crisis since the Great Depression.

US authorities have already taken more than $46 billion in fines from other big banks for their roles in the financial meltdown, according to Bloomberg News.

- 'Relief' -

Deutsche's chief executive Cryan had always insisted that the German lender would pay far less than the initial US demand.

And the bank brushed off fears the consumer relief element would have a significant impact on its results.

"The financial consequences, if any, of the consumer relief are subject to the final terms of the settlement, and are not currently expected to have a material impact on 2016 financial results," the bank said.

Deutsche Bank's share price plummeted in late September on news of the US fine demand to historic lows of 9.90 euros.

Investors feared their stakes would be diluted if the lender -- already struggling with a painful restructuring and a morass of legal entanglements around the world -- was forced to raise fresh capital to cover the fine.

Its stock ended Friday's session 0.34 percent higher at 17.81 euros after surging by more than four percent at the start of trading.

"Although today's settlement is not the end of the route, it has been a good short-term relief for investors, given that Deutsche Bank needn't raise capital to cover for legal charges in the immediate future," said analyst Ipek Ozkardeskaya of London Capital Group.

- Further probes -

While the settlement resolves a major headache for Deutsche, the lender is still facing some 8,000 legal challenges, including an investigation by New York regulators into alleged money laundering at its Russian branch.

Deutsche has had to set aside billions in provisions to deal with the cases.

Meanwhile, it is undergoing a massive shake-up under Cryan, who plans to cut units and slash 9,000 jobs in a bid to improve the bank's profitability at a time of low interest rates and sluggish global growth.

Barclays, Deutsche Bank and Credit Suisse were among several major banks implicated in the global financial crisis, along with Royal Bank of Scotland.

Credit Suisse on Friday said that under its own agreement reached with the US, it would pay the DoJ a civil monetary penalty of $2.48 billion and provide consumer relief totalling $2.8 billion.

The deal still needs to be approved by the bank's board, it added.

News of the settlements contrasted sharply with the DOJ's surprise decision to sue Barclays in open court, after failing to find a mutually acceptable resolution.

"Barclays appears to be playing the long game, hoping it can get a better result in the courts," said LCG analyst Jasper Lawler.