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Germany's biggest bank returned to the US high-grade bond market on Tuesday to sell an additional $1.5 billion worth of debt, offering more than double the yield it paid a year ago. Deutsche raised $3 billion in a bond sale last week.
This has given investors in the troubled bank confidence it can tackle the litigation with the US Department of Justice. ... "If they are able to take $4.5 billion out, this shows there is clearly demand for the name if there is adequate compensation," Reuters quotes one syndicate banker as saying.
According to Bloomberg's sources, this week's deal was at 290 basis points above borrowing benchmarks, while last Friday's was at 300 basis points. "It would be expensive for Deutsche Bank to go to the public market for debt issuance now because it has to pay a significant premium and that may shake confidence among investors," Ben Sy, head of fixed income, currencies and commodities at the private banking arm of JPMorgan Chase in Hong Kong told the media.
"The private debt sale shows they can still access the market for sizable term funding," he added.
The figure is roughly the market value of the bank at the upper end of its valuation. The fines are related to RBS's alleged wrong-doing which includes the mis-selling of mortgage-backed securities in the US which led on to the housing crisis.That's not all. They've already paid $1.1bln to settle one probe, face another case involving over 100 small businesses ($1.23bln in damages), $2.45bln in damages for mis-selling Enterprise Finance Guarantee loans (which RBS denies), and a $7.36bln lawsuit for misleading shareholders before the 2008 bailout.
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"The concern is that it could be another Deutsche Bank-style situation where the fines that come in are higher than the market expects," said Laith Khalaf, an analyst at financial service company Hargreaves Lansdown as quoted by Reuters. The expert stressed that there was no reason to invest in RBS until it settles the issues.
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If the bank manages to win in court and reduce the fines, it expects to pay around $5.5 billion, a sum it has already set aside to cover the damages, according to analysts. However, experts warn the DOJ might fine the bank over $11 billion in the next few months.
RBS also faces a fine of up to $5 billion to settle a similar case with the US Federal Housing Finance Agency, for selling $32 billion of mortgage-backed securities before the financial crisis.
Comment: Once again Putin sheds light on the US anti-Russian propaganda. Hopefully the world is listening and watching.