Deutsche Bank is reporting a large (euro) 2.15 billion ($2.91 billion) loss for the fourth quarter (Q4) because of asset writeoffs and lawsuit expenses, as the bank's new leaders reshape its business to meet regulatory and business challenges.
The bank wrote off the value of investments and businesses it owns as it works to meet new requirements for banks to hold bigger financial buffers against losses. That means exiting some of the bank's risky investments and assets.
It took accounting losses of (euro) 1.9 billion for the fallen value of businesses it had acquired before 2003, and for risky assets and investments that it is in the process of selling off. Expenses for litigation the bank is facing came to (euro) 1.0 billion.
The loss compared to a (euro) 186 million profit a year ago. Revenue rose 14 percent to (euro) 7.9 billion from (euro) 6.9 billion. Analysts surveyed by FactSet expected a bare profit of (euro) 62 million. The bank's full-year net profit fell to (euro) 665 million from (euro) 4.32 billion in 2011. Full year revenue rose to (euro) 33.74 billion from (euro) 33.22 billion.
Co-CEOs Juergen Fitschen and Anshu Jain, who took over from Josef Ackermann last year, said Thursday the performance of the bank's core business was otherwise strong, and management recommended an unchanged dividend to shareholders of 75 euro cents a share.
They said the losses came from ``the most comprehensive reconfiguration of Deutsche Bank in recent times.''
Jain said that the bank's outlook for 2013 is better than it was at the same time in 2012, with the U.S. economy recovering and a reduction in financial-market turmoil in the eurozone. He warned on a conference call with analysts however that the bank's restructuring was ``a journey that will take years, not months.''
Like all global banks, Deutsche Bank is under pressure from an international effort, known as Basel III, to hold more capital as a buffer against losses. Basel III is a response to the financial crisis that began in 2007 with large bank losses on mortgage-backed securities in the United States and worsened with the collapse of U.S. investment bank Lehman Brothers.
Building larger capital buffers can mean either raising capital by selling new shares, or by exiting risky investments and holdings _ since the capital requirement is measured against the value of outstanding loans and investments adjusted for how risky they are. The more risky a security or asset, the more capital must be held.
Deutsche Bank has put many of these assets in a separate unit which will manage their disposal. Jain said the bank's efforts during the year at selling off or writing down risky investments as the equivalent of selling (euro) 8 billion in new shares.