Deutsche Bank has agreed to pay billions of dollars to the U.S. government to settle claims that it packaged up toxic mortgages between 2005 and 2007.
Risky assets from Deutsche Bank and other financial firms played a role in the meltdown of the U.S. housing market and the global financial crisis that followed.
Under the preliminary deal announced late Thursday, Germany’s biggest lender said it will pay a fine of $3.1 billion, far lower than the original sum demanded by the U.S. Department of Justice three months ago.
Other big Wall Street banks, including JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley, reached similar deals totaling roughly $36 billion in recent years in relation to their their pre-crisis mortgage activities.
Deutsche Bank said it has also promised to provide $4.1 billion in measures like loan modifications to homeowners and borrowers in the U.S. It’s forecasting a $1.17 billion hit to its fourth-quarter profit from the fine, but it doesn’t expect the other measures to have a serious impact.
The U.S. Justice Department wasn’t immediately available for comment. It originally demanded a $14 billion fine in September, leading shares in the bank to crash to their lowest level in over 30 years.
Investors worried the latest penalty would hobble the bank, which has already been weakened by stricter banking regulations, hefty legal costs and low interest rates.
Local media even reported that Germany was considering a state-backed rescue for the bank, though the government quickly said a bailout deal was not in the cards.
Shares in the bank have staged a recovery since their September lows, but are still down more than 20% since the start of the year.
Deutsche Bank has already shelled out billions to settle other charges that it conspired to manipulate global interest rates and colluded with other banks to rig foreign exchange rates.
— Rob McLean contributed to this report.