Deutsche Bank and Credit Suisse receive a small christmas gift – Diary Management

The two banks agreed yesterday to pay a combined figure of US$ 12,500 million to resolve the investigations conducted by the united States with respect to sales of debt toxic during the crisis.

(Bloomberg).- Two investment banks european received the Friday a relief to christmas. Deutsche Bank AG and Credit Suisse Group AG agreed to pay a combined figure of US$ 12,500 million to resolve the investigations conducted by the united States with respect to sales of debt toxic during the crisis.

For any sector normal, that would be bad news. In the financial world, however, provides a necessary truth and effectively soothes investors to put a price on this legal dispute. The price of shares in Deutsche rose; the Credit Suisse declined only slightly.

it Is remarkable that, apparently, both banks can pay these agreements without recourse to their shareholders. Deutsche Bank has failed to pay a fine of up to$ 8,000 million and Credit Suisse a nearly US$ 4,000 million, according to some estimates.

The civil penalties, initial of today are well below that level, at US$ 3,100 million to Deutsche and$ 2,500 million to Credit Suisse. This will mean a somewhat painful loss of thousands of millions of dollars in the fourth quarter, but could have been much worse.

The agreements come to the time in which investors betting on a financial basis much more solid for the investment banks. It is necessary to remember that Deutsche Bank faced a potential existential crisis in September. At that time, the US would have been pointing to a fine of up to US$ 14,000 million, just when investors were losing faith in the ability of Deutsche to generate money in the financial world post-crisis.

however, since November, the actions of the banks have had a good performance, thanks to a rise in the confidence of the economic landscape and the choice of Donald Trump, who promised to reduce regulations. The shares of Deutsche Bank have climbed 45% since 1 November, and the Credit Suisse 11.4%. Analysts predict a growth of the earnings per share for both banks during the next year.

Where things get a bit more complicated is the recollection of the payments agreement, in the form of "relief for the consumer", which usually is delivered through amendments to credit and other types of aid. That is what remains unknown from these fines and that represents the largest part of the total amount, where Deutsche should be US$ 4,100 million and Credit Suisse US$ 2,800 billion in "relief". That could affect future earnings. For example, Credit Suisse will pay about US$ 560 million per year for the next five years, according to analysts of Vontobel. Even so, split the costs in several years is positive.

The news of today does not imply that Deutsche and Credit Suisse have been spared the worst. Both are in the midst of restructuring is painful, which could permanently damage their brands in a market of investment banks crowded that is only just beginning to see a resurgence. Deutsche Bank still has other legal cases to be resolved and must still find buyers for assets like its subsidiary retail Postbank. But as Christmas arrives, "not as bad as it could have been" is a gift that the european banks will be happy to receive.