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28Jan16

See Deutsche Bank Annual Report 2014 - Credit Exposure from Derivatives


Deutsche Bank Says Managers Won't Get Bonuses Amid Record Loss


Deutsche Bank, confirming that it would post a record loss for 2015, said on Thursday that members of its management board would not receive bonuses for the year and that shareholders should not expect a dividend until 2017 at the earliest.

The giant German bank reported a loss of 6.8 billion euros, or $7.4 billion, in 2015, as it set aside money to cover lawsuits and official investigations. It also suffered a decline in revenue in its investment banking unit.

The numbers essentially tally the business damage for Deutsche Bank, which has been distracted by a long list of accusations of wrongdoing in financial markets and has been buffeted by management upheaval.

In a news conference on Thursday, the bank's co-chief executive, John Cryan, said that the bank's general bonus pool would be smaller "as a matter of justice" to reflect the impact of the provisions the bank took in 2015, particularly for the legal cases.

"By and large, I think we are underpaying against our international peer group this year, and I hope that many staff understand why," he said. "The bonus pool this year will be down by a fair amount on the previous year. I think that's right."

But he sought to take the blame for Deutsche Bank's financial calamity. "I feel responsible for basically a 7 billion loss," Mr. Cryan said. "Personally responsible for all of it. It's not someone else's fault."

Mr. Cryan, who took over as co-chief executive in July, has been moving quickly to try to address the bank's legal and organizational problems. The measures have hurt profit, but they could pay off if he succeeds in resolving the litigation issues and making the bank less complex and easier to manage.

Mr. Cryan said he was optimistic that the bank could make "significant inroads" on its outstanding legal matters this year.

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.

The bank, Germany's largest, said that it would deduct 1.2 billion from fourth-quarter profit because of legal issues, compared with 500 million in the fourth quarter of 2014. For the full year, the bank said that it set aside 5.2 billion for litigation, compared with 2 billion in 2014.

Profit also suffered because of a 30 percent decline in revenue, to 2.1 billion, at the bank's investment banking unit, which is based in London. The corporate banking and securities unit lost 1.2 billion during the last quarter of 2015, compared with a profit of 323 million a year earlier.

Deutsche Bank attributed the loss in investment banking to what it called "a challenging trading environment" and less activity in financial markets by clients. For the bank as a whole, revenue declined 15 percent to 6.6 billion in the quarter.

The bank also said that 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.

Anshu Jain resigned as co-chief executive of Deutsche Bank in June as investors contended that he had not adequately dealt with the legacy of past misdeeds. Jürgen Fitschen, the other co-chief executive, is scheduled to step down in May, when Mr. Cryan will become the sole chief.

On Thursday, Mr. Cryan was asked whether he planned to leave Deutsche Bank after reorganizing the company.

"Sometimes I go home in the evening and I say to my wife, 'I wish some people would actually think I had some talent for running a company and not just cleaning it up,'" he said. "My colleagues may think differently."

But he said he looked forward to staying. "I think once we have the bank set up, its cost bases, its capital in a good place," Mr. Cryan said, "it should be fun running a company like this."

[Source: By Chad Bray and Jack Ewing, The New York Times, London, 28Jan16]

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