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Deutsche Bank Announces $7 Billion Yearly Loss as Legal Issues Weigh on Results
In a surprise earnings announcement, Deutsche Bank on Wednesday evening reported a huge yearly loss of 6.7 billion euros ($7.3 billion) as the cost of past wrongdoing continued to weigh on its earnings.
The bank, which is Germany's largest, said that it would deduct €1.2 billion from fourth-quarter profit because of legal issues. Including money allocated in previous quarters, the total set aside for litigation in 2015 is €5.2 billion, the bank said.
After stock markets opened in Europe on Thursday, Deutsche Bank shares were down by 7 percent through midday trading.
For the fourth quarter, the bank announced that it had a net loss of €2.1 billion, in contrast to a net profit of €441 million a year earlier.
The bank also said €800 million in reorganization costs, including employee severance payments, contributed to its losses in the latest quarter. For all of 2014, the bank reported a net profit of €1.7 billion.
Deutsche Bank was scheduled to release earnings next week but instead moved up the release of the key figures.
The bank did not say which of the lawsuits against it or official investigations would cause the charges. The bank has already paid billions in fines and settlements related to accusations that it colluded with other banks to fix benchmark interest rates, and that it violated international sanctions against countries like Iran.
Deutsche Bank also faces accusations of misconduct in foreign currency trading, which have led to lawsuits by clients who claim they lost money as a result.
Anshu Jain resigned as co-chief executive of Deutsche Bank in June amid complaints by investors that he had not dealt adequately with the legacy of past misdeeds. Jürgen Fitschen, the other co-chief executive, is scheduled to step down in May.
John Cryan, co-chief executive of Deutsche Bank since July, has been trying to reorganize the bank to make it less complex and better able to comply with stricter regulations. In October, Mr. Cryan announced a management shake-up focused on Deutsche Bank's investment banking unit. But the figures reported on Wednesday are a sign that legal problems are likely to continue to distract from attempts to make the bank more consistently profitable.
In addition, revenue declined to €6.6 billion in the quarter, from €7.8 billion a year earlier, because of "challenging market conditions," the bank said, without giving further details. It said the figures are preliminary and that it would report more details on Jan. 28.
In recent years, Deutsche Bank has battled a long list of accusations of wrongdoing in financial markets. In November, the bank agreed with the authorities in the United States to pay a fine of $258 million in connection with allegations that it conducted transactions with countries subject to American sanctions, including Iran, Libya, Syria, Myanmar and Sudan.
In April, Deutsche Bank agreed to pay $2.5 billion in penalties related to accusations it was among banks that manipulated global interest rates underpinning trillions of dollars in mortgages, student loans and other debt. The bank is also among those accused of colluding to rig benchmark rates for currencies, and it faces lawsuits from companies and other investors who say they lost money as a result.
[Source: By Jack Ewing, The New York Times, Frankfurt, 20Jan16]
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