The banks have had a tough week as bad news slams the sector, compounded by analyst downgrades of their stocks.
The SPDR S&P Bank ETF ended the week down 2.1 percent. Frankfurt-listed shares of Deutsche Bank fell more than 9 percent on Friday, while U.S.-traded shares of Wells Fargo and Citigroup closed down about 1.5 percent and 1.4 percent, respectively.
Equity research firm AlphaValue has changed its opinion on Deutsche to "sell" after the bank confirmed that the Justice Department made an opening claim position of $14 billion to settle a number of investigations related to mortgage securities and related activity between 2005 and 2007. Although Deutsche may eventually settle at a much lower figure, AlphaValue said it reduced its earnings forecasts for Deutsche since the bank's litigation provisions are currently at 5.5 billion euros, or about $6.14 billion.
Deutsche said in a statement that it "has no intent to settle these potential civil claims anywhere near the number cited" and that "negotiations are only beginning." It expects the eventual figure to be "similar to those of peer banks which have settled at materially lower amounts."
Atlantic Equities downgraded Wells Fargo to "underweight" and cut its price target to $44 from $51 on Friday. Although the bank was recently fined $185 million by regulators for setting up 2 million accounts without customer authorization, Atlantic said the fine "is not material." The firm's concern is that Wells Fargo that the news "will be disruptive" and "poses a huge reputational risk." Atlantic said that the bank may lose "its premium rating" as the story plays out.
It was also reported that federal prosecutors are investigating Wells Fargo.