European Stocks Shoved Down As Deutsche Bank Sells Off

Through the rosiest colored glasses, one might say that things at Deutsche Bank have been really, massively, insanely bad of late.

"They are dropping like a stone", said Tomas Kinmonth, a credit strategist at ABN Amro Bank NV in Amsterdam.

USA and European stock markets retreated on Friday, as banking shares led by Deutsche Bank slumped on news U.S. authorities were hunting down Germany's biggest lender over a record fine. But now the bank faces a $14 billion fine.

JPM expects RBS to provision an additional $4.2 billion by the end of 2017, to cover a series of litigation and conduct issues which may include settlement of a USA style class action brought by investors who claim they were misled about the bank's financial health at the time of its rights issue in spring 2008.

The settlement proposal, made during negotiations between the U.S. Department of Justice and Deutsche Bank over claims that the German bank missold mortgage-backed securities, was larger than expected.

Germany's biggest bank would be "significantly undercapitalized" even if an eventual settlement with the DoJ can be covered by the bank's reserves, Andrew Lim, a Societe Generale analyst, said in a note to investors Monday.

The bank noted that the negotiations with Justice Department have just begun, and the US agency has invited the company to submit a counter proposal as a next step.

Deutsche Bank gladly told shareholders in July that it planned to close its biggest pending legal cases this year, including one for its sales of residential mortgage-backed securities in the U.S. before the financial crisis.

The bank's €1.75 billion ($2 billion) of 6% additional Tier 1 bonds, the first notes to take losses, fell 5 cents to 78 cents on the euro, the biggest drop since the United Kingdom voted to leave the European Union.

"Do I think we'll see a $14-billion settlement? No".

Last year, USA market regulators fined the German lender $55 million, concluding that it had overvalued its holdings of credit derivatives by at least $15 billion during the financial crisis.

John Cryan, Deutsche Bank chief executive has been cutting risky assets, freezing dividend payments and eliminating about 9,000 staff to boost capital levels.

The bank's shares suffered sharp losses in trading in Frankfurt on Friday, dropping almost 7.3 per cent by around 1045 GMT to stand at 12.15 euros.

USA investment bank Goldman Sachs, for example, agreed in April to pay more than $5 billion to settle similar allegations.

Deutsche Bank previously thought that a settlement between $2 billion and $3 billion would be fair, as it had already paid $1.9 billion in 2013 to resolve similar claims, according to WSJ.

Reporting weak profits over the second quarter, the British CEO in July warned that his painful therapy might need to become "yet more ambitious" if anaemic conditions persist in the wider economy. Europe's broad FTSEurofirst 300 index .FTEU3 closed down 0.79 percent on the day.