Deutsche in the red as reforms cut into profits

 
Tim Wallace
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DEUTSCHE Bank made a heavy loss in the final quarter of 2012 as it struggled to shore up its balance sheet and increased provisions against a possible Libor fine, the bank said yesterday.

The German bank recorded a pre-tax loss of €2.6bn (£2.2bn), taking profits for the year down to €0.7bn – a drop of 87.3 per cent on the year.

Revenues stayed stable, edging up 1.5 per cent to €33.7bn. But expenses jumped €4.6bn to €30.6bn despite a programme of job cuts.

Of that rise, €1.9bn came from impairments of goodwill and other intangible assets, while €1bn relates to litigation provisions.

The bank continued pushing hard to improve its capital levels, raising the ratio on a Basel III basis to eight per cent, up from below six per cent a year ago. In part that is due to a €55bn decline in risk-weighted assets.

That improvement led to JP Morgan analysts upgrading the bank’s stock, arguing “new management under co-chief executive Anshu Jain has illustrated its ability, to improve its capital position above expectation and guidance in the fourth quarter.”

“The positive surprise came mainly from “low quality” internal model adjustments and portfolio optimisations rather than real legacy asset sales – however, the market will still give Deutsche credit for these improvements,” said Kian Abouhossein.

The bank’s shares rose 2.45 per cent, but Jain warned more pain was ahead as the bank pushes through its reform programme.