Deutsche Bank posts €1.9bn fourth-quarter loss as legal bills take toll
Bank lost market share to Wall Street banks which more than doubled bond revenues
Deutsche Bank chief financial officer Marcus Schenck (L) next to chief executive John Cryan during the annual press conference in Frankfurt, Germany, as the bank reported a net loss of €1.9 billion for the fourth quarter of 2016 and the second consecutive loss for a full year result. Photograph: EPA/Torsten Silz
Deutsche Bank posted a net loss of €1.9 billion in the fourth quarter as legal costs for recent violations outstripped gains from a rebound in bond trading.
Germany’s flagship lender missed the higher expectations of analysts who had expected the bank to post a fourth-quarter net loss of just €1.16 billion.
The bank hiked its litigation reserves to €7.6 billion from €5.9 billion in the quarter, as it had to put more money aside for settlements such as over the sale of toxic mortgages and sham Russian trades.
Revenues at its cash cow bond trading division were up 11 per cent in the quarter as it benefited from a surge in trading across interest rate products, commodities and foreign exchange (FICC) as investors responded to Donald Trump’s victory in the US presidential election.
But it lost market share to Wall Street banks, some of which more than doubled bond revenues, in part due to paring back its investment bank, where it has thrown out products and cut ties with thousands of clients.
While Deutsche Bank ranked third globally for FICC trading in 2013, it slipped to sixth place by mid-2016, according to the latest data from industry analytics firm Coalition.
“We are optimistic after a promising start to this year”, chief executive John Cryan said in a statement. Almost all businesses had a strong start in January, the bank said.
Deutsche Bank shares fell 1.9 per cent in pre-market trading at brokerage Lang & Schwarz, while Germany’s blue-chip index was seen down 0.3 per cent.
The amount of money it has set aside to cover the legal bill for past breaches rose 29 per cent to €7.6 billion at year-end, compared to the end of September, while it upped provisions for possible future legal action by 38 per cent to 2.2 billion.
“Whilst 2015 and 2016 were peak years for litigation, 2017 continues to be burdened by resolving legacy matters,” the bank said in a presentation.
In equities trading, Deutsche Bank saw revenues decrease in the quarter as hedge fund activity retreated, while revenues from corporate and investment banking edged up despite Deutsche Bank missing out on advising clients on some large deals.
Total revenues were up 7.5 per cent at €7.1 billion in the quarter.