In a letter announcing the huge third quarter loss to employees, new co-chief executive John Cryan said the profit warning would “have to be factored in a few way into our upcoming decisions on variable compensation for the year”.
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Deutsche Bank will report a record pretax loss of €6-billion ($6.7-billion) in the third quarter and will cut or skip dividend payments for 2015, it said late on Wednesday.
Analysts said markets recognised that the new boss was taking action to tackle long-standing problems – and it seemed unlikely the bank would have to raise capital soon.
It said it was also making a provision of €1.2bn (£900m) to cover legal costs arising from regulatory investigations and slashing the value of its 20% stake in China’s Hua Xia Bank by €600m (£443m).
Deutsche Bank just warned that it anticipates a multi-billion dollar bust.
The bank, Germany’s largest, forecast a net loss of 6.2 billion euros, or almost $7 billion, for the quarter.
Most of the writedown is on goodwill, which does not affect the bank’s capital position. Deutsche Bank now expects to report a fully-loaded CRR/CRD4Common Equity Tier 1 ratio for the third quarter of approximately 11%, which includes the impact of European Banking Authority RegulatoryTechnical Standards (“Prudential Valuation”) that were adopted in thequarter.
However, the analysts point out that even though DB’s “clean” Q3 results look broadly in line and goodwill impairment charges are having no impact on CET1 capital, the magnitude of the headline loss and the dividend news is likely to leave the market unsettled.
“Global banks are cutting their non-essential holdings or those in which they don’t have much control to focus limited resources on their core businesses”, said Richard Cao, a Shenzhen-based analyst at Guotai Junan Securities Co. Deutsche Bank AG has a 12-month low of €22.66 and a 12-month high of €33.41.
Deutsche Bank had turned to Postbank to diversify its funding mix by boosting consumer deposits in the midst of the global financial crisis. That was the deal, after all, that turbocharged Deutsche Bank’s transformation from a relatively staid German corporate lender into a bond and commodities trading behemoth.
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It will review financial plans ahead of the announcement of further details of its Strategy 2020, which is expected October 29. Barclays officials say the post may go to a former investment banker, raising the likelihood of more structural tweaks.
