Shares in Germany's Deutsche Bank down sharply after lender announces large 4th-quarter loss

FRANKFURT – Shares of Deutsche Bank AG fell sharply on Monday after Germany’s biggest lender announced an unexpected fourth-quarter loss largely due to weak investment banking results and the cost of strengthening its finances.

Deutsche Bank, which warned the headwinds will continue this year, saw its stock slump 3.9 per cent in early trading to 37.80 euros, making it the worst performer on Frankfurt’s DAX index.

The bank on Sunday night posted a fourth-quarter net loss of 965 million euros ($1.3 billion), an announcement that came 10 days before it was scheduled to release its results. Analysts were expecting a profit of about 200 million euros. Revenues also disappointed, falling 16 per cent to 6.6 billion euros.

The losses showed how the bank is still struggling to overcome previous legal entanglements and deal with new regulatory demands in an uncertain European economy.

Much of the decline in revenues in the fourth quarter came from the investment banking division, which suffered a steep fall in income from trading debt securities.

The bank has also faced a steady drag on earnings from expenses for litigation and legal settlements resulting from investigations of alleged past abuses. They totalled 528 million euros in the fourth quarter.

The bank suffered 1.1 billion euros in losses on risky investments it has set aside for disposal as it — along with other banks — faces demands from regulators to strengthen its finances in response to the market turbulence of recent years.

Market strategist Ishaq Siddiqi at ETX Capital called the results a “nasty set of numbers which have geared investors here in Europe for what could be an ugly earnings season for European banks.”

Co-CEO Anshu Jain said on a conference call with analysts that the bank was dealing well with factors that its management could control, such as reducing costs.

He said that excluding one-time expenses and the unit disposing of risky assets, the bank’s core operations earned 8.4 billion euros in 2013. That was up from 7.6 billion euros the year before and comparable with earnings before the financial crisis hit in earnest in 2008.

However, he warned that the outside factors — pending litigation, regulatory demands and tough markets — “will remain challenging in 2014.”