REUTERS: Deutsche Bank posted a net loss of 1.9 billion euros (US $ 2.05 billion) in the fourth quarter as legal costs for past misdeeds outstripped gains from a rebound in bond trading.
Germany’s flagship lender missed the higher expectations of analysts who had expected the bank to post a fourth-quarter net loss of just 1.16 billion euros.
The bank hiked its litigation reserves to 7.6 billion euros from 5.9 billion euros in the quarter, as it had to put more money aside for settlements such as over the sale of toxic mortgages and sham Russian trades. Revenues at its cash cow bond trading division were up 11 percent in the quarter as it benefited from a surge in trading across interest rate products, commodities and foreign exchange (FICC) as investors responded to Donald Trump’s victory in the U.S. presidential election.
But it lost market share to Wall Street banks, some of which more than doubled bond revenues, in part due to paring back its investment bank, where it has thrown out products and cut ties with thousands of clients.
While Deutsche Bank, in 2013, ranked third globally for FICC trading, it slipped to sixth place by mid-2016, according to the latest data from industry analytics firm Coalition.
“We are optimistic after a promising start to this year”, Chief Executive John Cryan said in a statement. Almost all businesses had a strong start in January, the bank said.
Deutsche Bank shares fell 1.9 percent in pre-market trading at brokerage Lang & Schwarz, while Germany’s blue-chip index was seen down 0.3 percent.
The amount of money it has set aside to cover the legal bill for past missteps rose 29 percent to 7.6 billion euros at year-end, compared to the end of September, while it upped provisions for possible future legal action by 38 percent to 2.2 billion.
“Whilst 2015 and 2016 were peak years for litigation, 2017 continues to be burdened by resolving legacy matters,” the bank said in a presentation.

In equities trading, Deutsche Bank saw revenues decrease in the quarter as hedge fund activity retreated, while revenues from corporate and investment banking edged up despite Deutsche Bank missing out on advising clients on some large deals.
Total revenues were up 7.5 percent at 7.1 billion euros in the quarter.