European bank stocks plunge on fresh mortgage misselling fines


Barclays, Credit Suisse and Deutsche Bank stock has fallen this morning as news emerges the group of banks face multi-billion pound fines for mis-selling mortgage-backed securities in the run-up to the financial crisis.

The Financial Times reports the US Department of Justice is hoping to agree a single settlement with the group of banks ahead of the US presidential election.

News of the Deutsche Bank fine had already leaked and has seen its stock fall to 30-year lows.

Barclays and Credit Suisse were both down 3.5 per cent this morning, while Deutsche Bank shares were down 7 per cent and temporarily fell below €10.

Investors have become increasingly nervous about the financial stability of Deutsche Bank, after an initial demand for the bank to pay $14bn (£10.8bn) was leaked.

Dave Jeal, head of investment products at stockbroker Interactive Investor, says while fines feature heavily in headlines these should already be priced-in.

Deutsche Bank has built up reserves of €5.4bn (£4.7bn), while Barclays has set aside £2.5bn for investigations and litigation and Credit Suisse has made provisions of SFr1.76bn ($1.82bn).

However, Jeal adds that Commerzbank’s announcement of job cuts and dividend suspensions was also casting a shadow over the sector.

“UK banks have yet to suffer to the same degree as UK interest rates stay positive.”