Deutsche Bank AG (NYSE: DB)
Deutsche Bank has been struggling in the market as of late, but that all seemed to change toward the end of the week. The reason for the volatility is relatively simple. The company is currently in negotiations with the United States Department of Justice. Today, we’ll talk about the negotiations, why the stock headed up late in the week, what we’re seeing in the market, and what we can expect to see from DB moving forward.
DB Is In Key Negotiations With The Department Of Justice
The 2008 and 2009 financial crisis was a hard time around the world. As the global economy crumbled, consumers lost entire retirements, jobs fell apart around the world, and more. As the crisis passed, it was time to look back and see what caused it so that we could avoid future instances of the same thing. In looking back, the United States Department of Justice found that while there were many causes of the crisis, one of the larger factors had to do with poor decisions made by some of the world’s largest banks. Deutsche Bank was one of these banks.
While most of the banks involved in the crisis have already settled with the United States Department of Justice, DB is one of the last to do so. Recently, there were major concerns, as the Department of Justice made the first offer of a $30 billion settlement. This would be one of the largest settlements and, for the bank, would be a massive hit.
Why The Stock Headed Up Toward The End Of The Week
While investors were incredibly concerned about the possibility of the settlement being overwhelmingly large, things changed toward the end of the week. Toward the end of last week, we started to learn of a possible $5.4 billion settlement.
If this were to be the final number, not only would DB have negotiated an incredible deal, the company would largely be let off of the hook. So, with the news of the possible low-cost settlement, the stock skyrocketed.
What We’re Seeing In The Market
As mentioned above, Deutsche Bank has been seeing gains in the market following news that a settlement may be far lower than expected. Yesterday, the stock closed the week off at $13.09 per share after a gain of $1.61 per share (14.02%). In after-hours trading, we’re seeing more gains. Currently DB stock is trading at $13.23 per share after a gain of 1.07% thus far.
What I’m Expecting To See Moving Forward
First and foremost, it’s important to be cognizant of the fact that negotiations are far from over. At the moment, a settlement of $30 billion seems unrealistic, and that’s a good thing. However, if you think that the negotiation is going to end with a $5.4 billion settlement, you’re an incredibly optimistic person. At the end of the day, such a small settlement for playing such a big role in the crisis is simply unrealistic. With that said, I have a relatively mixed opinion here. While DB is likely to be just fine in the long run, I believe that we’re going to see declines following the settlement news, as current rumors are setting expectations far too low.
[Image Courtesy of Wikimedia]