Germany's largest bank by assets acknowledged €1bn of costs for a swath of legal risks
Deutsche said the capital position improvement was equivalent to having raised at least €8bn of equity
Deutsche Bank's full-year net income was €665m, compared with €4.3bn in 2011
Deutsche Bank plunged to a €2.2bn quarterly net loss after it recorded billions of euros of writedowns and litigation charges in its biggest restructuring of unwanted business lines since the financial crisis.
Germany’s largest bank by assets acknowledged €1bn of costs for a swath of legal risks that have dogged the first months of Anshu Jain and Jürgen Fitschen’s reign as co-chief executives. The risks include the bank’s role in the global probe of attempts to manipulate benchmark interest rates, with Deutsche expected to reach a settlement with regulators this year.
Deutsche also wrote off €1.9bn of goodwill and other intangible assets, most of it for businesses that it acquired a decade ago and which have now been labelled as non-core and are set to be sold or run down.
The bank was able to point to progress in shoring up its capital, reporting that core tier one capital if incoming Basel III banking rules were applied had reached 8 per cent, three months earlier than planned. The bank had said it would reach 7.2 per cent at the end of the year.
Deutsche, which has drawn some criticism for its refusal to raise capital from investors, said the improvement in its capital position was equivalent to having raised at least €8bn of equity during 2012.
It came after the bank cut its risk-weighted asset base by €80bn since June. Cutting the amount of assets to be supported by a given amount of equity can also help a bank improve its capital ratios.
In a statement, Mr Fitschen and Mr Jain said Deutsche was making its “most comprehensive reconfiguration … in recent times” and was on a “path of deliberate but sometimes uncomfortable change”. The process would take years, they said.
Stripping out charges, the bank’s costs also rose, reflecting costs to implement job cuts and improve its IT.
In the three months to the end of December, Deutsche suffered a €2.6bn pre-tax loss and a net loss of €2.2bn. Quarterly revenues rose 14 per cent against a year ago to €7.9bn, with the bank saying its underlying performance had been strong. Adjusted for the charges, Deutsche’s quarterly pre-tax profit would have been €287m.
Full-year net income was €665m, compared with €4.3bn in 2011.