Litigation continues to define bank results, with Goldman’s MBS settlement slashing earnings at the US firm. At JP Morgan and Citi, however, litigation costs fell out of the results, meaning a flattering comparison with 2014 numbers and soaring profits.
Deutsche said it expected fourth quarter revenues of €6.6bn, down from €7.8bn in 2014. The strong year in 2014 was driven by the €3bn contributed by corporate banking and securities. Deutsche said that “challenging market conditions… principally in corporate banking and securities” accounted for 2015’s poor number.
The CB&S division has ceased to exist this year, and has been replaced by corporate and investment banking and global markets.
Analysts from Credit Suisse said: “The miss on revenues (€0.85bn) only explains half of the miss on the underlying profit before tax, and with no further details disclosed we assume that a higher underlying cost base is explaining the remaining difference (which if confirmed is a negative signal given that cost discipline is one of the key priorities of management).”
The bank did not disclose which investigation, settlement or fine accounted for the €1.2bn charge.
It devoted 12 pages of its third quarter report to discussing individual claims and conduct or litigation risk.
These include antitrust suits over the CDS and US Treasuries markets, investigations into foreign exchange, precious metal and benchmark manipulation, class actions over benchmarks, pre-crisis RMBS litigation, dollar dealings with embargoed countries, hiring practices and bribery, credit-linked notes and Kaupthing, a criminal investigation over the wind-up of Kirch and an investigation into Deutsche's dark pool.
Deutsche Bank also took a large goodwill writedown last year.