Deutsche Bank Stock Tumbles on Profit Warning
January 21 2016 - 5:00AM
Dow Jones News
FRANKFURT—Deutsche Bank AG shares tumbled early Thursday after
the bank warned it would post a full-year net loss on additional
charges tied to legal and restructuring costs and the impact of
difficult market conditions.
Deutsche Bank shares fell 5.4% shortly after trading started on
the Frankfurt stock exchange in contrast with the overall market as
German stocks rallied after steep recent declines.
Germany's biggest lender on Wednesday said it expects to report
its first full-year loss since 2008, equivalent to €6.7 billion on
a net basis. The results were announced ahead of a scheduled Jan.
28 earnings report.
They included a raft of charges the bank previously reported
during the third quarter as it marked down billions of dollars
worth of assets while undertaking a companywide restructuring under
new senior management.
John Cryan, who became co-chief executive in July, has outlined
plans to eliminate about 35,000 jobs, including by shedding
businesses, and revamp compliance and culture at a bank he has
described as saddled with broken technology and "poor historic
behavior."
Like other European banks, Deutsche Bank is cutting costs in the
teeth of difficult operating circumstances, including tougher
capital requirements, outdated computer systems, volatile markets
and stiff competition from U.S. banks.
"Litigation issues don't end with this mark down—we expect them
to persist for a multiyear a year period," Goldman Sachs said.
Deutsche Bank said it set aside €1.2 billion in the fourth
quarter for litigation charges, in addition to the €1 billion it
added the previous quarter, bringing the total amount taken last
year to €5.2 billion, without specifying details.
Goldman said the charges were likely tied to recent settlements
relating to U.S. mortgage-backed securities. Though the loss is
partly tied to legal costs, Goldman Sachs said underlying trends at
Deutsche Bank look weak even excluding nonoperating charges.
Goldman said the decline in Deutsche Bank's investment-banking
revenues was unexpected, considering the benefit of the dollar's
appreciation against major currencies and a generally good
performance from the fixed-income activities of its U.S.
investment-banking rivals, a sector where Deutsche Bank typically
performs well.
UBS said it expected Deutsche Bank to post losses "for some
time."
Bearish financial markets could entail weak revenues, threaten
Deutsche Bank's planned initial public offering of its Postbank
unit, and limit its ability to reduce risk-weighted assets, UBS
said.
Still, Deutsche Bank might yet escape having to tap shareholders
for more funds despite the pressures on its balance sheet, UBS
said.
Write to Sarah Sloat at sarah.sloat@wsj.com
(END) Dow Jones Newswires
January 21, 2016 04:45 ET (09:45 GMT)
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