Exclusive Deutsche Bank’s Investment Banking Unit Lost $1.3 Billion in Fourth Quarter on Legal Costs, Weak Sales

Germany’s largest bank on Thursday said its investment banking activities lost €1.2 billion, or $1.3 billion, before taxes in the fourth quarter of last year amid writedowns, falling revenue and loss of market share. Chief Executive John Cryan also warned that Deutsche Bank could still face “significant” additional legal costs over the course of 2016, on top of the more than €12 billion paid out in the last four years and another €5.5 billion already set aside to settle ongoing legal cases. Deutsche Bank slightly revised higher its full-year 2015 net loss to €6.8 billion from €6.7 billion announced in preliminary figures last week. The bank is in the midst of cutting 15,000 jobs, winding down some investment banking operations, spinning off its retail banking arm Postbank and closing operations in 10 countries. Mr. Cryan said the bank’s restructuring would cost another €1 billion this year. The shake-up is designed to return the bank to profitability as it digs out from a mountain of lawsuits and legal costs that have dogged the institution since the global financial crisis in 2008. Many of the bank’s current problems originated in its investment banking unit. Last April, it agreed to settle an interest rate-rigging scandal and accept a fine of $2.5 billion imposed by U.S. and British regulators, one of the largest ever imposed on a bank. “The lowering of our cost base remains our biggest task for this year and in the coming year,” Mr. Cryan, speaking in German, said in a press conference in Frankfurt. He warned that the bank’s cost base wouldn’t be reduced until 2017 at the earliest. Key investments were needed first, before the bank could return to profitability, he said. Deutsche Bank’s investment banking unit was a big contributor to profits before the financial crisis of 2008-2009. In the fourth quarter of 2014, investment banking generated a €323 million profit. Revenues from investment banking fell 30 percent in the fourth quarter to €2.1 billion. For all of 2015, Deutsche Bank’s investment banking operations lost €2 billion before taxes, compared with a €2.9 billion profit in 2014. Picture Source: AP