Deutsche Bank strikes $7.2 billion deal with U.S.

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Why banks are looking to spy movies for answers

Deutsche Bank has struck a deal worth $7.2 billion with the U.S. government to settle claims that it packaged up toxic mortgages between 2005 and 2007.

Risky assets from Deutsche Bank (DB) and other financial firms played a role in the meltdown of the U.S. housing market and the global financial crisis that followed.

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Under the preliminary deal announced late Thursday, Germany’s biggest lender said it will pay a fine of $3.1 billion and provide $4.1 billion in measures like loan modifications to homeowners and borrowers in the U.S.

Other big Wall Street banks, including JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS), reached similar deals totaling roughly $36 billion in recent years in relation to their their pre-crisis mortgage activities.

Swiss bank Credit Suisse announced early Friday that it had also reached a tentative $5.3 billion settlement with the U.S. Department of Justice, including a $2.48 billion fine and $2.8 billion in concessions to consumers.

deutsche bank clouds
Deutsche Bank shares crashed to their lowest level in more than 30 years in September.

Deutsche Bank’s settlement is significantly lower than the $14 billion originally demanded by the U.S. Department of Justice three months ago.

The bank says 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.

Its big original demand back in September prompted Deustche Bank shares to crash to their lowest level in over 30 years.

Investors worried such a penalty could hobble the bank, which has already been weakened by stricter banking regulations, hefty legal costs and low interest rates.

Related: Barclays sued by US over billions of dollars in toxic mortgages

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 close to 20% since the start of the year.

The shares reacted largely positively to news of the settlement, however, going up by 4.5% early Friday. Credit Suisse shares also rose by 2%.

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 and Rishi Iyengar contributed to this report.

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