DEUTSCHE BANK, Germany's largest lender, reported a surprise quarterly net loss of $US3 billion on Thursday, as new management tallied the cost of past mistakes and tried to draw a line under the bank's troubled past.
The fourth-quarter loss of €2.2 billion ($2.8 billion) included about €1 billion the bank set aside to cover legal proceedings and investigations, including accusations that Deutsche Bank was among institutions that rigged global benchmarks used to set rates on loans. The bank also booked losses in recognition of the diminished value of acquisitions going as far back as its purchase of Bankers Trust in the US in 1998.
While the loss partly reflected problems peculiar to Deutsche Bank, it was a reminder of the weak state of European banking more than four years after the beginning of the financial crisis. Deutsche Bank is considered relatively healthy by European standards.
The loss at Deutsche Bank contrasts with strong earnings recently by competitors like JPMorgan Chase. Still, its shares rose 2.9 per cent in Frankfurt trading as investors apparently concluded that the German bank's relatively new co-chief executives, Jurgen Fitschen and Anshu Jain, were front-loading the bad news. Investors were also rewarding the bank's efforts to increase the size of the reserves it holds as insurance against losses.
The two men took over the reins less than seven months ago and have declared their intention to deal more severely with the legacy of the financial crisis.
Deutsche Bank said revenue in the fourth quarter rose 14 per cent to €7.9 billion, from the period a year earlier. The bank warned in December that it would incur major charges in the quarter, but most analysts had not expected the loss to be so big. Before taxes, the loss was €2.6 billion.
For the full year, Deutsche Bank reported a net profit of €665 million after subtracting €3.5 billion related to legal problems or diminished value of assets.
The bank's problems are far from over. Deutsche Bank continues to cope with the consequences of behaviour by some employees, including a tax evasion inquiry that led to a police raid on company headquarters in December. Executives acknowledged the bank could face additional lawsuits related to its sale of securities tied to the US subprime mortgage market.