Conflicting Reports Cast Doubts On Deutsche Bank’s $14 Billion Tax Bill

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Conflicting Reports Cast Doubts On Deutsche Bank’s $14 Billion Tax Bill

Conflicting Reports Cast Doubts On Deutsche Bank’s $14 Billion Tax Bill

Will the German government lend a helping hand and bail out Deutsche Bank (NYSE: DG)?

This is the question on top of many investors minds on Wednesday. Shares of the German-based bank are lower by nearly 9 percent over the past trading day after the U.S. Justice Department slapped the bank with a whopping $14 billion penalty for alleged wrongdoings in its mortgage business prior to the financial crisis.

Reports surfaced earlier in the week that Deutsche Bank would need to tap either the debt or equity market to raise funds needed to pay the settlement, if it is unable to negotiate a smaller amount. A $3.5 billion settlement would be manageable for the bank but any amount above that could cause problems.

On Wall Street, analysts at Goldman Sachs suggested that Deutsche Bank operated under the assumption it’s fee would be much smaller in the $2 billion to $3 billion range. The research team also noted that Deutsche Bank stated in its second quarter filings it has a reserve fund for litigation activity of just $5.5 billion

Meanwhile, the German government reportedly made it clear it has no plans to step in and bail out the bank as doing so would be seen as a political move in an election year. The government also reportedly said it won’t intervene on the bank’s behalf in any discussions with the U.S. authorities.

Here is where the situation becomes confusing.

German-based Die Zit said on Wednesday that the government is preparing an emergency plan to help the bank. The report helped boost Deutsche Bank’s US-listed ADR higher by more than 2 percent on Wednesday while its German-listed stock closed its trading session higher by 2 percent at 10.77 euros.

However, a second report surfaced on Wednesday which said Germany’s finance ministry is denying Die Zit’s report which was labeled as not being true.

So which one is it?

For the time being, it may be prudent for investors to believe the German government’s side of the story. Various media and news sources have quoted a statement from the German finance ministry which read: “the federal government is not preparing any rescue plans” and that “there is no reason for such speculation.”