Deutsche Bank re­sults un­der the mi­cro­scope

The Myanmar Times - - International Business -

GER­MANY’S big­gest lender Deutsche Bank will face re­newed prob­ing to­day, as in­vestors pore over its thirdquar­ter re­sults after being hit with a multi-bil­lion-dol­lar fine by the US Depart­ment of Jus­tice.

“It will be im­por­tant to keep an eye on growth in pro­vi­sions for le­gal risks,” Equinet an­a­lyst Philipp Haessler told AFP.

News of a US$14 bil­lion de­mand from the DoJ over Deutsche’s role in the sub­prime mort­gage cri­sis sent shares in the bank plung­ing to a his­toric low of 9.90 eu­ros ($10.75) in late Septem­ber and reawak­ened fears for the wider Euro­pean bank­ing sec­tor.

The fig­ure is far higher than the 5.5 bil­lion eu­ros of pro­vi­sions Deutsche has set aside to cover some 8000 out­stand­ing le­gal cases world­wide.

US banks have set­tled for far less in sim­i­lar cases, and a source told AFP in late Septem­ber that Deutsche was in talks on bring­ing the fine down to around 5.4 bil­lion eu­ros, al­though the fi­nal fig­ure could still change.

Deutsche shares have climbed back to their prior level of around 13 eu­ros but it is still down about 40 per­cent from the start of the year.

In June the In­ter­na­tional Mone­tary Fund la­belled the bank “the most im­por­tant net con­trib­u­tor to sys­temic risks in the global bank­ing sys­tem”.

An­a­lysts sur­veyed by Fac­tset pre­dict that the bank will book a fresh loss of around 950 mil­lion eu­ros in the third quar­ter.

Be­sides the sub­prime cases, mar­kets will be watch­ing for signs that chief ex­ec­u­tive John Cryan’s re­struc­tur­ing is be­gin­ning to bear fruit just over a year into his ten­ure, with the flag­ship in­vest­ment bank­ing arm in par­tic­u­lar fo­cus.

Mr Cryan has with­drawn from a broad swathe of ac­tiv­i­ties and re­gions, and cut re­sources.

Strong re­sults from US ri­vals like Gold­man Sachs and JPMor­gan Chase have put pres­sure on Deutsche to show it can de­fend its turf.

Other head­winds for Deutsche in­clude low in­ter­est rates sap­ping the prof­itabil­ity of its tra­di­tional bank­ing busi­ness, in­creased reg­u­la­tion and higher cap­i­tal re­quire­ments since the fi­nan­cial cri­sis. Doubts also re­main over a re­turn to prof­itabil­ity after a 7 bil­lion eu­ros loss in 2015.

After a se­cond quar­ter in which prof­its fell 98pc to just 20 mil­lion eu­ros, Mr Cryan in July said the re­struc­tur­ing might have to be­come “more am­bi­tious” if weak eco­nomic con­di­tions per­sisted.

The Bri­tish CEO’s plan al­ready calls for the slash­ing of around 9000 jobs world­wide and the clo­sure of 200 branches in home mar­ket Ger­many. –

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