By Eyk Henning
FRANKFURT--Germany's Deutsche Bank AG posted a surprise
fourth-quarter net profit Thursday after slashing the reserves it
set aside to cover looming legal action and on higher investment
banking revenue.
Its net profit of EUR438 million ($494 million) compared with a
EUR289 million loss forecast by analysts in a poll by The Wall
Street Journal. The bank reported a EUR1.4 billion loss in the
fourth quarter a year earlier.
Fourth-quarter revenue rose by 19% to EUR7.8 billion from EUR6.6
billion, due to an uptick in client activity in the bank's large
fixed-income and currency trading operations. its entire investment
banking business reported pretax profit of EUR516 million compared
with EUR384 million a year earlier.
"While we are encouraged by many of our full-year and
fourth-quarter business results, we are working hard to further
manage our cost base, maintain our capital strength and increase
our returns to shareholders," co-chief executives Anshu Jain and
Jürgen Fitschen said in a joint statement.
Deutsche Bank set aside EUR207 million in reserves for
litigation in the fourth quarter, below the EUR1.11 billion set
aside a year earlier and less than the EUR900 million Morgan
Stanley analysts had expected. Deutsche Bank said the lower
litigation reserve "largely reflects timing differences as a number
of major litigation cases have yet to be settled, " pointing to
delayed settlement processes.
Deutsche Bank is one of a group global lenders under
investigation for their alleged role in manipulating the London
interbank offered rate, or Libor, and currency fixings, and of
violating U.S. sanctions. In total, Deutsche Bank has EUR3.2
billion in reserves to cover potential legal fines.
Apart from those looming fines, Deutsche Bank is in the midst of
a strategy review that may result in it selling or cutting back
some activities such as retail banking or investment banking,
according to people familiar with the matter. The bank plans to
announce the results of its review in the spring, when it belatedly
hosts its annual news conference originally scheduled Thursday.
"We look forward to updating the market and all of our
stakeholders, on the next phase of our strategy in the second
quarter," Messrs. Jain and Fitschen said.
The presentation of a new strategic plan will mark a major step
for the bank's co-CEOs, who took control of Germany's largest bank
by market value from Josef Ackermann in mid-2012. Both men are
under pressure to accelerate the bank's turnaround and improve
results since its share price has been lagging that of
international rivals over the past year.
Deutsche Bank's retail operations made a EUR55 million pretax
profit, compared with EUR370 million expected by analysts and
EUR218 million reported in the fourth quarter a year earlier. The
decline comes as Deutsche Bank set aside more than EUR330 million
for potential claims from retail banking clients following a recent
verdict from Germany's Supreme Court that affects the wider German
banking industry. Analysts hadn't included the hit in their
estimates.
Write to Eyk Henning at eyk.henning@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires