Deutsche Bank talks with Justice Department said to continue

[LONDON] Deutsche Bank AG's negotiations with the US Justice Department to resolve a years-long investigation into the lender's handling of mortgage-backed securities are continuing, according to people familiar with the matter.

Germany's Bild newspaper reported in its Sunday edition that chief executive officer John Cryan wasn't able to reach an agreement with the Justice Department during a meeting in Washington. He was there to help negotiate potential multibillion-dollar penalties, according to the report.

The German lender and US authorities haven't broken off their talks, said the people, who asked not to be identified because discussions are private.

Concerns about the bank's ability to pay a US$14 billion opening settlement bid from the Justice Department sent the company's stock to a record low last month. Mr Cryan has said he expects US authorities to scale back the initial request.

A Deutsche Bank spokesman declined to comment on the status of talks and on Bild's article. A representative for the Justice Department declined to comment when contacted after the newspaper report.

The bank, which set aside 5.5 billion euros (S$8.5 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations, including a money-launder inquiry tied to its Russia operations. Analysts at Barclays Plc speculate that could cost the bank as much as 2 billion euros.

Mr Cryan, a Briton who speaks fluent German, has sought for the past three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health. The bank is holding informal talks with Wall Street firms about options to deal with legal costs, including a stock sale that could raise 5 billion euros, people with knowledge of the matter said last week.

Qatar's royal family is also considering increasing its stake in Deutsche Bank to as much as 25 per cent, according to people with knowledge of the matter.

Shares of the company have dropped 46 per cent since the end of December, making them the third-worst performer in the 38-company Bloomberg Europe Banks and Financial Services Index.

Mr Cryan has said the lender may not post a profit this year after its first annual loss since 2008 last year.

With plans to eliminate thousands of jobs and cut risky assets, he called 2016 a peak restructuring year.

BLOOMBERG