Deutsche Bank Sell-off Drags Lenders Lower

European stocks dip down as Deutsche Bank AG (DBK; DB) is up for a $14 billion U.S. Justice Department settlement for mortgage-backed security claims.

The FTSE 100 slipped 0.3% to 6, 712.98 while the Stoxx Europe 600 (SXXP) fell 0.2% to 339.55, except the health care group of both exchanges which posted modest gains. Shares of Royal Bank of Scotland (RBS) and Barclays (BARC; BCS) slid to 4.1% and 2.1% respectively.

Also, other bank shares were trading lower. Standard Chartered PLC (STAN) was off 2.7%; HSBC PLC (HSBC; HSBA) down 0.7%; Lloyds Banking Group PLC with a modest dip of 0.3%.

“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning,” the German bank said in a statement.

Analysts think that the settlement amount was way above their expectations but may just be a gateway for further discussions between the two parties. Given the case, anxiety over other European banks to face similar claims still intensifies.

Investigations by the U.S. Justice Department are connected with the bank’s issuance and underwriting of residential mortgage-backed securities between 2005 and 2007.

The German bank expects to end the negotiation with a materially lower amount as with banks that faced the same claim from the Justice Department.

In January, Goldman Sachs Group Inc. (GS) settled claims for $5.1 billion while J.P. Morgan Chase & Co. (JPM) paid a $13 billion fine in 2013. In 2014, Wall Street bank Citigroup Inc. (C) was asked to pay $12 billion to settle mortgage probe, but ended up paying only $7 billion.

The Deutsche Bank settlement was said to be the largest fine put forward by U.S. authorities after financial crisis. But analysts estimate that the bank will settle the investigation at “somewhere around the third” of the suggested $14 billion fine.

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