Commerzbank Shares Fall on News of Settlement Talks
Shares in Commerzbank fell about 3.5 percent on Tuesday following news that Germany’s second-largest lender could be the latest European institution to settle with the American authorities over suspicions that it violated sanctions.
The broader German stock market was down only slightly, and the decline in Commerzbank most likely took into account the expectation that the fine would be a small fraction of the $8.9 billion penalty agreed to last week by BNP Paribas, France’s biggest bank, and that any deal would not include admission of criminal wrongdoing.
The decline may have reflected investor concern that a penalty would come while Commerzbank is still trying to rebuild profits and replenish its capital ahead of stress tests to be conducted later this year by the European Central Bank.
Investors are anxious for Commerzbank to close another chapter in its excruciating recovery from the financial crisis and its aftermath. The German government still owns 17 percent of the company, which it acquired as part of a rescue that began in 2008.
A spokeswoman for Commerzbank in Frankfurt declined to comment on Tuesday on news that the bank was close to a settlement in an investigation into whether it transferred money through its American operations on behalf of companies in Iran and Sudan.
A spokesman for the German Finance Ministry also declined to comment or to say whether government representatives were involved in any settlement talks with American officials in connection with Commerzbank.
Germany’s relations with the United States, already under strain, suffered further last week because of allegations that an employee of the German intelligence service was spying for a foreign government, said to be the United States. But there was no indication on Tuesday that the inquiry against Commerzbank had added to tensions.
Commerzbank could strike a settlement deal with the state and federal authorities as soon as this summer, said people briefed on the matter, who were not authorized to speak publicly.
The contours of a settlement, which the authorities have only begun to sketch out, are expected to include at least $500 million in penalties for Commerzbank, the people added.
Although prosecutors are still weighing punishments, the people briefed on the matter said that the bank would most likely face a so-called deferred prosecution agreement, which would suspend criminal charges in exchange for the financial penalty and other concessions.
A potential deal with Commerzbank is expected to pave the way for a separate settlement with Deutsche Bank, which also declined to comment on Tuesday. Deutsche Bank’s shares were down about 1.6 percent.
Jon Peace, a banking analyst at Nomura in London, said on Tuesday that a smaller fine for Commerzbank would show that the huge BNP Paribas penalty was not necessarily the standard for all banks.
“It’s quite good news for banks in Europe,” Mr. Peace said. “It shows that prosecutors are tailoring fines to individual institutions. It’s not just a one-way street of ever rising provisions.”
Commerzbank disclosed as early as 2010 that it was under investigation over suspicions that it had violated sanctions. In its 2013 report, the bank said that it was being investigated by the New York district attorney, the United States Justice Department and other officials over suspicions that it violated sanctions against Iran, Sudan, Myanmar and Cuba.
Commerzbank set aside 934 million euros, or about $1.27 billion, to cover the cost of litigation.
However, Commerzbank’s list of legal problems is far shorter than that of Deutsche Bank. Commerzbank has a much smaller presence on Wall Street and outside Germany than its larger rival, which also faces investigations into suspicions that it was involved in the manipulation of benchmark interest rates and foreign currency trading.
Commerzbank’s main problems following the financial crisis stemmed from huge losses it suffered as a result of lending for commercial real estate and to the depressed shipping industry.
Jessica Silver-Greenberg and Ben Protess contributed reporting from New York.
Source: NYT
