Germany’s largest bank, Deutsche Bank AG, registered a surprise fourth-quarter net profit as provisions for fines and legal settlements declined.
In a statement the company said net income in the last three months of the previous year was 438 million ($494 million), compared with a loss of 1.36 billion euros in the same period a year earlier. Nine analysts surveyed by Bloomberg expected a 341 million-euro loss, on average.
“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, quoted by The Wall Street Journal.
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 €3.2 billion in reserves to cover potential
legal fines, says The WSJ.
Last year Deutsche Bank raised cash from investors to raise capital and bolster returns by seeking to expand the debt-trading business as rivals exit. Co-Chief Executive Officers Anshu Jain and Juergen Fitschen are preparing a fresh strategy after legal costs and stricter regulation curbed profitability. The Frankfurt-based lender was the worst performing large bank stock in 2014.
The stock has dropped 28 percent last year. The bank is now valued at about 60 percent of its tangible book, indicating that it’s worth less than investors would expect to receive if the firm liquidated its assets. That’s the lowest of the top nine global investment banks, according to Bloomberg data.
The investment banking and trading unit saw its pretax profit almost quadruple to 516 million euros in the fourth quarter from a year earlier, beating the 142 million-euro average of seven estimates compiled by Bloomberg.
Deutsche Bank’s revenue from trading debt and currencies rose 13 percent to 1.15 billion euros in the fourth quarter from a year earlier, the company said. That beat the 1.08 billion euro average estimate of eight analysts surveyed by Bloomberg.
Strategic plan
Besides the 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 is planning 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, according to The WSJ.
