Germany's largest lender Deutsche Bank AG is expected to post a loss amounting to 2.1 billion euros ($2.3 billion) for the fourth quarter. This was due to intending more money to settle legal matters as well as to take a restructuring charge. Thus, its yearly loss amounted to a whopping 6.7 billion euros ($7.3 billion), making it the biggest loss ever since 2009.
According to Bloomberg, around 1.2 billion euros were allocated for lawsuits while 800 million euros went to restructuring and severance costs. This was mainly in the private and business clients division. The Frankfurt-based firm also stated that 'challenging market conditions' have hurt earnings during the quarter. As a result, group revenue was cut to about 6.6 billion euros, compared to its net revenue last year which was 7.8 billion euros.
With this, Co-Chief Executive Officer John Cryan has sought for ways to rebuild investor confidence and earnings growth that were still affected up to this day due to past misconduct costs. Financial Times further reported that under Cryan's overhaul, Deutsche Bank intends to cut down a quarter of the workforce, or decreasing headcount by 26,000, in 2018. At the same time, the plan is to suspend the dividend to prop up capital buffers.
"A real fresh start means even lower stated net profits for some time," analyst Daniele Brupbacher said, adding that he has a neutral rating on the shares.
New York Times stated that Deutsche Bank's quarterly loss, as mentioned, was due to legal and overhaul costs. It paid $2.5 billion-worth of penalties related to allegations that it rigged global interest rates, together with other banks, that supported trillions of dollars in student loans, mortgages and other debt.
Also, the bank is one of those claimed to have plotted the manipulation of benchmark rates for currencies, leading to more lawsuits from companies and other investors who revealed to have lost money as an outcome. Thus, its common equity Tier 1 ratio, which is a key measure of financial strength, dropped to about 11 percent towards the end of December, from 11.5 percent three months earlier.
It was a great loss indeed. Deutsche Bank, however, is trying to get back on track by all means, as what Cryan has shared to be his plans to fix and solve the bank's problems.
