Morning Commentary: Deutsche Bank boosted by settlement; preferreds hold firm going into holiday

By Stephanie N. Rotondo

Seattle, Dec. 23 – Volume was rather light in early Christmas Eve eve trading, but preferred stocks continued to gain strength.

The Wells Fargo Hybrid and Preferred Securities index was up 10 basis points at mid-morning.

The news of the day – at least in early dealings – was that Deutsche Bank AG had agreed to a $7.2 billion settlement with the U.S. Department of Justice over its sales of toxic mortgage debt ahead of the financial crisis.

The bank will also take a $1.2 billion pretax charge for the quarter because of the agreement.

Investors have been waiting for the agreement since September, when the DOJ said the German bank could face a penalty of up to $14 billion.

“It’s one unknown taken off the table for them,” a trader said. “So it’s good for them.”

As such, the bank’s trust preferreds were trading up at mid-morning.

The 7.6% TruPs (NYSE: DTK) were up 31 cents, or 1.24%, at $25.30, while the 8.05% TruPs (NYSE: DKT) were up 25 cents at $26.24.

The 6.55% TruPs (NYSE: DXB) were 39 cents better, or 1.64%, at $24.15.

In addition to the Deutsche settlement, it was also reported that Credit Suisse AG was slapped with a $5.3 billion penalty. Barclays Bank plc failed to reach an agreement and is thus being sued for fraud by the DOJ.

Barclays is the first bank not to reach a settlement over its subprime mortgage transactions.

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