Investors in Europe’s biggest banks, frustrated with the problems of today, just got a reminder that the lenders still have to pay for the sins of the past.
Shares in Credit Suisse Group AG, Royal Bank of Scotland Group Plc, Barclays Plc and UBS Group AG fell after Deutsche Bank AG disclosed that the U.S. Department of Justice is seeking $14 billion to settle claims it sold faulty securities before the financial crisis. While U.S. rivals including JPMorgan Chase & Co. and Citigroup Inc. have reached settlements, banks across the Atlantic have yet to resolve similar probes.
While Deutsche Bank said it’s not willing to pay “anywhere near” $14 billion to resolve the DOJ case, the claim has added to concerns about the ultimate size of the agreements and whether European banks will need to raise more funds to cover them, analysts said. The region’s largest lenders have seen a slump in earnings, hurt by volatile markets and negative rates, with the U.K.’s vote to exit the European Union adding to uncertainty about Europe’s growth prospects.
“News flow over last couple of months has been centered on one major topic: Brexit,” said Joseph Dickerson, an analyst at Jefferies International Ltd. in London. “The market may have become slightly complacent, and this serves as a reminder the numbers could prospectively be quite large.”