Deutsche Bank, Credit Suisse To Pay $12.5 Billion To Settle U.S. Cases

Bloomberg reported on Friday that Deutsche Bank AG (USA) DB and Credit Suisse Group AG (ADR) CS have agreed to collectively pay $12.5 billion as part of a settlement into sales of toxic debt that the banks sold in the lead-up to the financial crisis.

Deutsche Bank will hand over $7.2 billion, and Credit Suisse will hand over $5.3 billion. Excluding these two settlements, U.S. authorities reached settlements with six financial institutions and collected more than $46 billion.

Deutsche Bank said in its second-quarter filings that it set aside a $5.5 billion reserve fund for litigation purposes.

Bank of America Corp BAC agreed to the largest settlement of $16.7 billion since the Obama administration began investigating Wall Street banks for their role in selling subprime mortgage bonds.

Meanwhile, the U.S. Department of Justice sued Barclays PLC (ADR) BCS on Thursday, alleging that the bank committed fraud in its selling of more than $30 billion of mortgage securities that contributed to the financial crisis. The suit was a result of the breakdown of settlement negotiations between the government agency and the bank.

Michael Huenseler, an investor at Assenagon Asset Management and an owner of nearly 1 percent of all of Deutsche Bank's shares, told Bloomberg that the settlement "might help in the short run because a major source of uncertainty has been cleared."

Similarly, Peter Casanova, an analyst at Kepler Cheuvreux, told Bloomberg that Credit Suisse's settlement eliminates the "largest remaining major uncertainty" and certainly represents "good news" for the investment community.