Frankfurt: Deutsche Bank posted a 2.6 billion euros (Dh13.05 billion) quarterly loss as it took legal and restructuring charges aimed at drawing a line under past scandals and boosting its capital position in a tougher regulatory and trading environment.
Germany’s biggest lender, which said in December it would take a “significant” restructuring charge, said on Thursday it made a fourth-quarter pretax loss of 2.6 billion euros.
The bank said its priority was to build up a better safety cushion, cutting back on risky assets to free up capital.
Its core tier one capital ratio under Basel III rules rose to 8 per cent at the end of 2012, from under 6 per cent at the end of 2011, a move that helped dispel investor doubts about the need for a fundraising.
“The most important message is that there will be no capital hike,” said Guido Hoymann, an analyst at Metzler Securities.
“The positive surprise is that Deutsche Bank’s core tier 1 ratio jumped to 8 per cent in the fourth quarter and they could now achieve 9-9.5 per cent by year-end 2013 and comply with Basel III fully...well ahead of deadlines.”
Banks across the world are slashing costs and selling or writing off weaker assets in a bid to meet tougher regulations aimed at preventing a repeat of the 2008 financial crisis.
Many, including Deutsche Bank, are also battling to rebuild their reputations while being investigated for scandals such as the manipulation of benchmark interest rates.
Strong operating results were overshadowed by a 1.9-billion-euro goodwill impairment to pay for Deutsche Bank’s new divisional structure and to hive off underperforming assets into a “non-core” unit, where they could be either run down or sold.
The bank also announced 1 billion euros in litigation charges in the fourth quarter, reflecting “adverse court rulings and developments in regulatory investigations.”
In volatile trading, Deutsche Bank shares were up 0.7 per cent at 37.4 euros by 0850 GMT.
“There is the hope that the bank has packed all the bad news into 2012 and can now start afresh in the new year,” said one Frankfurt trader.
Deutsche Bank said the new non-core division would house 125 billion euros worth of assets that either eat up too much capital or fail to throw off sufficient profits.
Much of the impairment was due to revaluing those assets, with the bulk - 1.2 billion euros - attributable to the corporate banking and securities unit (CB&S), its main investment banking arm and traditionally a strong performer.
CB&S posted a quarterly pretax loss of 548 million euros.
“We embarked upon the path of deliberate but sometimes uncomfortable change in order to deliver long term, sustainable success for the bank. Simultaneously, we set the bank on course for fundamental cultural change,” co-chief executives Juergen Fitschen and Anshu Jain said.
“This journey will take years, not months,” they added.
Chief Financial Officer Stefan Krause played down the legal problems, saying peers had similar issues. “The tale of legal liabilities is fairly typical,” he told analysts. “The regulatory and litigation environment remains challenging.”
Analysts had expected Deutsche Bank to report a fourth-quarter pretax profit of 116 million euros, the average of seven estimates in a Reuters poll of banks and brokerages showed. It was not immediately clear whether the analyst estimates had factored in goodwill impairments.
The bank’s net loss for the quarter was 2.2 billion euros.
Since the end of 2011, the bank has reduced headcount by 2,777, the results showed. The group is in the midst of a restructuring drive designed to achieve annual cost savings of 4.5 billion euros by 2015.