Deutsche gives the City a short, sharp, €965m shock

The bank posted its fourth-quarter results last night, 10 days earlier than expected. No wonder: the news isn't good...

by Emma Haslett
Last Updated: 20 Jan 2014

As any investor worth their salt knows, 2013 wasn’t an easy year for Deutsche Bank. There was the $1.9bn it had to pay to the US’ Federal Housing Finance Agency in order to settle a lawsuit over mortgage-backed securities. Then there was the €725m it had to shell out to European authorities for its part in the Libor scandal. Then, of course, there were all the legal costs and restructuring fees associated with those.

So it was no secret that, when the bank posted its fourth-quarter results next week, the news wasn’t going to be good. Deutsche, though, has taken the same considered attitude as a small boy with a plaster on his knee: a short, sharp dose of pain is far better than a long, slow, build-up. Get the bad news over with early on, and avoid the speculation and potential catastrophic fall in share prices that could lead to.

Thus, the bank decided to post its fourth-quarter results last night, 10 days earlier than expected, showing it had made a net loss of €965m during the last three months of 2013. Admittedly, the figure is still an improvement on last year’s €2.5bn loss – but it’s still a massive disappointment for analysts, who had expected net income of €700m.

The bank’s investment arm was particularly badly hit, with revenues falling by 27% during the fourth quarter as fixed-income trading dropped by 31%, pushing full-year revenues for the division down by 12% to €13.6bn. That must be particularly galling for Deutsche shareholders when you consider the investment division at rival Goldman Sachs had its best year since the beginning of the crisis, with revenues of $1.6bn. Bank of America reported a similarly encouraging performance, racking up investment banking fees of $1.7bn.

Back at Deutsche, total net revenues for the year fell 5% to €31.9bn, while pre-tax income rose to €2.07bn, up from €814m last year. Not surprisingly, shares dropped by about 4.6% in early trading.

Still, at least the bank has taken its first steps on the long road to (financial) righteousness. Last year, the bank published a new set of ‘Values and Beliefs’ (its capitalisation, not ours), including ‘we will do what is right – not just what is allowed’. Which should put an the end to those pesky fines….

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