European banks’ legal tab exceeds $77 billion amid probes

Europe’s biggest banks, led by Lloyds Banking Group Plc and Deutsche Bank AG, have racked up more than $77 billion in legal costs since the financial crisis, five times their combined profit last year.

Since September 2008, the 18 banks with the highest litigation expenses paid at least $24.9 billion settling lawsuits and probes, set aside $31.5 billion to compensate U.K. clients improperly sold products including mortgage insurance and earmarked $20.9 billion for further penalties, data compiled by Bloomberg show.

The sum equates to spending $42 million a day. The total may be higher as many settlements aren’t public, Bloomberg reports.

“Banks aggressively followed a very, very return-oriented business model before the crisis,” Martin Hellmich, a professor of risk management and regulation at the Frankfurt School of Finance & Management, said in a phone interview. “Now they’re paying for the past with settlements and fines.”

European banks are meeting the cost of helping some clients launder money and avoid taxes while cheating others by not disclosing the risk of products designed to protect them from interest rate swings and manipulating markets for their own profit. The penalties come as regulators require firms to set aside more funds to strengthen finances and as executives look for ways to boost shareholder returns even amid lower revenue.