Deutsche Bank Posts Surprise Quarterly Loss on Legal Costs
Bloomberg News
Deutsche Bank AG (DBK), Europe's biggest investment bank by revenue, reported a surprise fourth-quarter loss, hurt by legal costs and accounting charges.
The bank had a pretax loss of 1.15 billion euros ($1.56 billion) on 528 million euros in litigation-related expenses, as well as costs tied to its reorganization and charges to adjust credit, debt and funding valuations, the Frankfurt-based firm said yesterday in a statement. The average estimate of six analysts surveyed by Bloomberg was for a 628.5 million-euro pretax profit. The bank announced results 10 days ahead of schedule.
Deutsche Bank is putting aside funds to settle probes and lawsuits that include allegations it deceived clients about products linked to U.S. mortgages and that its traders attempted to rig benchmark interest rates. The firm is spending money to improve controls, reduce headcount and move staff to cheaper locations as part of a plan to increase profitability.
Last year 'was the second successive year in which we have invested in the bank's future growth and in further strengthening our controls while addressing legacy issues,' Deutsche Bank Co-Chief Executive Officers Anshu Jain and Juergen Fitschen said in the statement. 'We expect 2014 to be a year of further challenges and disciplined implementation.'
Jain, 51, and Fitschen, 65, said they are 'confident' the bank can reach targets they set for 2015.
Shares Lag
Deutsche Bank gained 7.4 percent in Frankfurt trading over the past 12 months, lagging behind a 17 percent increase in the 44-company Bloomberg Europe Banks and Financial Services Index.
The bank reported a 3.17 billion-euro pretax loss for the fourth quarter of 2012 after writing down the value of businesses that failed to meet its revenue expectations, according to company filings. The firm's profit in the third quarter of 2013 was almost wiped out after it added 1.2 billion euros to its reserves for legal expenses, the filings show.
Moody's Investors Service lowered its outlook on Deutsche Bank's credit rating to negative last month, saying the company's plan to reorient its business and boost profitability has been hampered by rising litigation-related expenses.
Deutsche Bank had 2.3 billion euros set aside for legal costs at the end of December, down from 4.1 billion euros three months earlier. The company reached at least three settlements with regulators and clients last month, its filings show.
The bank agreed to pay U.S. financing companies and Freddie Mac 1.4 billion euros to settle claims that it didn't provide adequate disclosure about mortgage-backed securities. The European Commission fined Deutsche Bank 725 million euros on Dec. 4 for its part in rigging interest rates linked to the London interbank offered rate. The company said Dec. 19 that it reached a settlement to forfeit 221 million euros to end a derivatives contract with Italian bank Banca Monte dei Paschi di Siena SpA.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
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