Friday 16 September 2016 5:05 pm

Shares in European lenders finish lower after Deutsche Bank is asked to pay $14bn over mortgage-backed securities claims

Shares in British banks finished at the bottom of the FTSE 100 after Deutsche Bank after it admitted it had been asked to pay a massive $14bn (£10.6bn) fine by the US Department of Justice (DoJ).

Shares in the lender were down 8.5 per cent at €11.99, its worst day of trading since the day after the Brexit vote, after it said in a statement overnight it had entered talks with the DoJ over the fine.

The payment, which is intended to settle civil claims in connection with the bank's issuance and underwriting of residential mortgage-backed securities between 2005 and 2007.

Read more: It's eight years since the Lehman Brothers collapse. What's changed?

The news caused British lenders to finish lower, with Royal Bank of Scotland falling 4.4 per cent to 185.6p and Barclays falling 2.8 per cent to 164.7p

Standard Chartered fell 2.7 per cent to 607.1p, HSBC fell 0.9 per cent to 566.7p. Lloyds fared slightly better, dipping 0.4 per cent to 56.51p.

European banks recovered some of their losses, with Credit Suisse falling 3.9 per cent to CHF 12.82, and UBS dropping 2.53 per cent to CHF 13.47.

But Unicredit, which has been badly hit this year, fell 5.8 per cent to €1.97, while Societe Generale fell 2.7 per cent to €31.13.

Nowhere near the number

In today's statement, the lender said it had "no intent to settle these potential civil claims anywhere near the number cited.

"The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts."

What analysts said

Jasper Lawler, at CMC Markets, pointed out there was "no use Cryan over spilt MBS". 

"The $14bn would be about 80 per cent of Deutsche Bank’s market cap and may dissuade employees from following CEO John Cryan’s recent advice to 'be more daring'.

"As a point of reference, for similar claims Citigroup paid $7bn, Bank of America $16.7bn and Goldman Sachs settled for $5.1bn this year.

"Just because it’s not a US bank, it doesn’t mean Deutsche Bank will pay less, in fact it could be the opposite. British lender Barclays and Deutsche Bank were once top-ranked dealers in the US mortgage market. Tit-for-tat of fines between European and US regulators could mean the eventual figure is higher than Deutsche Bank could otherwise have hoped for."