Deutsche Bank AG and Credit Suisse Group AG agreed to pay a combined $12.5 billion to resolve U.S. investigations into sales of the toxic debt that fueled the financial crisis, putting behind them a major dispute that undermined confidence in the banks and raised questions about their turnarounds.
Deutsche Bank will pay $7.2 billion and take a $1.2 billion pretax charge this quarter, while Credit Suisse agreed to a $5.3 billion deal and will recognize a $2 billion hit to earnings, the banks said in separate statements early Friday. Their announcements came hours after Barclays Plc, which is being probed in a related case, was sued for fraud Thursday by the Justice Department after it balked at paying the amount the government sought in negotiations.
The settlement costs will probably lead Deutsche Bank and Credit Suisse to second straight annual losses and prompt continued questions over whether the German lender will raise capital through a share sale. The Obama administration is pressing to wrap up investigations of Wall Street firms for creating and selling the subprime mortgage bonds that fueled the 2008 financial crisis. Before the two deals on Friday, authorities had already extracted more than $46 billion from six U.S. financial institutions over their dealings in mortgage-backed securities.