Shares in UK banks have seen a mixed response to news Barclays (BARC) is being sued by the US Department of Justice (DoJ) while Deutsche Bank has agreed a $7.1bn (£5.7bn) settlement.
Bloomberg reports Barclays was willing to pay a maximum of $2bn to settle its charges on mortgage bonds while the DoJ’s opening position was not disclosed.
Barclays trades 0.8% lower at 225p.
COMPLAINT REJECTED
‘Barclays rejects the claims made in the complaint,’ says a statement.
‘Barclays considers that the claims made in the complaint are disconnected from the facts. Barclays will vigorously defend the complaint and intends to seek its dismissal at the earliest opportunity.’
Banks have typically sought to reach agreement with the DoJ rather than risk lengthy and potentially embarrassing court proceedings.
DEUTSCHE SETTLES
RBS (RBS), which is on the hook for a potential $12bn (£9.7bn) fine over the mis-selling of mortgage bonds in the US is up 1.1% at 231p after Deutsche Bank reached agreement with the DoJ over similar allegations.
The Frankfurt-based lender settled for $7.1bn, half the amount previously expected.
Leaks to the press in October said Deutsche had previously been asked by the DoJ to pay $14bn and investors are hoping RBS may also achieve a better-than-feared settlement.
FURTHER PENALTIES?
Elsewhere, HSBC (HSBA) is the main drag on the blue chip benchmark this morning, down 1.1% to 651p. Investors may be fretting over the potential for further fines: HSBC has already paid billions in penalties for claims including money laundering and mortgage-backed securities.
Declines at HSBC may also be related to a weak trading session in Asia in which financial stocks performed poorly. Many of HSBC's assets are located in the region.
BAILOUT OR BAIL IN?
Investors have also been focusing on attempts to secure funding for Italy’s struggling Banca Monte dei Paschi di Siena (BMPS), after it failed to agree terms yesterday with private investors. BMPS is now tapping a state rescue fund for the €5bn of capital it requires.
Some bondholders are being bailed-in via a conversion of their bonds to equity though the Italian government is attempting to prevent heavy losses on retail investors which own many of the high yielding securities.
