Litigation costs knock back profit at Deutsche Bank

Deutsche Bank reported a significant drop in net income for the third quarter of the year as it set aside more than expected for litigation costs and confirmed the global slowdown in debt trading had hit revenues.

A provision of €1.2 billion for litigation charges helped push net income down 94 per cent to €41 million between July and September, falling from €747 million in the third quarter of 2012.

The figure was significantly below analysts’ expectations, with an average polled by Bloomberg expecting net income to total €430 million.

"Litigation came to the foreground – for the industry, and for us," co-chief executive Anshu Jain said in a call with investors yesterday.

Mr Jain had already warned in September that the bank was likely to announce it was putting aside more money to meet litigation costs in its third-quarter results.

The bank was forced to revise its profits for 2012 downwards in March after setting aside higher costs for mortgage litigation in the US.

Analysts at Morgan Stanley estimate that Deutsche could face up to $1.3 billion in settlement charges with the Federal Housing Finance Agency as part of its ongoing investigation into 18 banks over mortgage-backed security mis-selling.

Last week, JPMorgan became the fourth bank to settle with the FHFA, agreeing to pay $5.1 billion to resolve a large part of the allegations against it. UBS settled for $885 million in July.

Deutsche, Europe’s largest investment bank by revenue, has also set aside about €500 million towards expected fines in relation to global regulators’ investigations into the Libor scandal.

Deutsche has still not been fined over its involvement in the global rate manipulation affair, where large penalties are still being handed out by the regulators.

– Copyright The Financial Times Limited 2013