M&T Bank Corp. is suing Deutsche Bank AG for $82 million, saying the Frankfurt company's securities unit sold CDOs that proved an unsound investment.
In the suit, filed Monday in the New York Supreme Court for Erie County, M&T said it bought the CDOs in February of last year after being told by Deutsche Bank that the instruments would provide "a higher interest rate than Treasury bills or high-grade corporate bonds, with a risk level lower than high-grade bonds and approaching the risk-free level of Treasury bills."
The CDOs' yield subsequently fell below those of Treasurys and even certain corporate bonds.
The $66.1 billion-asset Buffalo company also says that Deutsche Bank touted the CDOs as "safe, secure, and nearly risk free," and that the claims turned out to be "entirely false." Deutsche Bank knew the debt ratings for the CDOs were inflated, the suit says. M&T is demanding that Deutsche Bank repurchase the securities.
In the fourth quarter, M&T took a $78 million after-tax charge related to the impairment of its CDO portfolio.