Deutsche Bank Stock Tumbles on Profit Warning

FRANKFURT—Deutsche Bank AG shares tumbled early Thursday after the bank warned it would post a full-year net loss on additional charges tied to legal and restructuring costs and the impact of difficult market conditions.

Deutsche Bank shares fell 5.4% shortly after trading started on the Frankfurt stock exchange in contrast with the overall market as German stocks rallied after steep recent declines.

Germany's biggest lender on Wednesday said it expects to report its first full-year loss since 2008, equivalent to €6.7 billion on a net basis. The results were announced ahead of a scheduled Jan. 28 earnings report.

They included a raft of charges the bank previously reported during the third quarter as it marked down billions of dollars worth of assets while undertaking a companywide restructuring under new senior management.

John Cryan, who became co-chief executive in July, has outlined plans to eliminate about 35,000 jobs, including by shedding businesses, and revamp compliance and culture at a bank he has described as saddled with broken technology and "poor historic behavior."

Like other European banks, Deutsche Bank is cutting costs in the teeth of difficult operating circumstances, including tougher capital requirements, outdated computer systems, volatile markets and stiff competition from U.S. banks.

"Litigation issues don't end with this mark down—we expect them to persist for a multiyear a year period," Goldman Sachs said.

Deutsche Bank said it set aside €1.2 billion in the fourth quarter for litigation charges, in addition to the €1 billion it added the previous quarter, bringing the total amount taken last year to €5.2 billion, without specifying details.

Goldman said the charges were likely tied to recent settlements relating to U.S. mortgage-backed securities. Though the loss is partly tied to legal costs, Goldman Sachs said underlying trends at Deutsche Bank look weak even excluding nonoperating charges.

Goldman said the decline in Deutsche Bank's investment-banking revenues was unexpected, considering the benefit of the dollar's appreciation against major currencies and a generally good performance from the fixed-income activities of its U.S. investment-banking rivals, a sector where Deutsche Bank typically performs well.

UBS said it expected Deutsche Bank to post losses "for some time."

Bearish financial markets could entail weak revenues, threaten Deutsche Bank's planned initial public offering of its Postbank unit, and limit its ability to reduce risk-weighted assets, UBS said.

Still, Deutsche Bank might yet escape having to tap shareholders for more funds despite the pressures on its balance sheet, UBS said.

Write to Sarah Sloat at [e-mail]

(END) Dow Jones Newswires

January 21, 2016 04:45 ET (09:45 GMT)

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