Deutsche results offer window on restructuring effort

FRANKFURT Wed Jan 30, 2013 8:03pm EST

A branch of Germany's largest business bank Deutsche Bank AG is seen downtown Frankfurt, January 14, 2009. REUTERS/Kai Pfaffenbach

A branch of Germany's largest business bank Deutsche Bank AG is seen downtown Frankfurt, January 14, 2009.

Credit: Reuters/Kai Pfaffenbach

FRANKFURT (Reuters) - Deutsche Bank's (DBKGn.DE) reshuffled management will present fourth-quarter results on Thursday, the first test of a radical overhaul to adapt the business to leaner, more cautious times.

Co-chief executives Anshu Jain and Juergen Fitschen, who took office in June, have conceded the bank's sometimes reckless pursuit of profits and market share must change.

The results will be pared by a charge for the restructuring, which is aimed at helping the bank weather a weaker economy and tougher regulation but is not just about cost cuts and reforming risk policy.

Deutsche has said it will break down "silo thinking" within asset management, wealth management and investment banking, divisions run for decades with a high degree of autonomy.

The restructuring makes it a little harder to predict the results and the bank's outlook is further clouded by allegations that its traders manipulated inter-bank lending rates and gave incorrect valuations for derivatives on its books.

Still, analysts believe Deutsche achieved a good performance from trading fixed income, currencies and commodities, an area where rivals like UBS have pulled back.

"An improving macro backdrop should in theory alleviate capital concerns and help fourth and first-quarter performance, but this is overshadowed by ongoing headwinds," Credit Suisse analysts said in a note on January 28. "Litigation risk in particular never seems far away."

The Frankfurt-based lender is expected to report fourth-quarter pretax profit of 116 million euros ($156 million), the average of seven estimates in a Reuters poll of banks and brokerages showed.

Deutsche Bank is combining asset and wealth management divisions and creating a non-core division to hive off 125 billion euros ($168.47 billion) worth of assets.

In mid-December, it said fourth-quarter earnings will take a "significant" hit from the restructuring, which is designed to achieve annual cost savings of 4.5 billion euros by 2015.

Analysts warn that profits in 2013 could be hit by lawsuits and fines even as a rally in fixed-income markets and improved investor confidence from more stable euro zone markets help lift earnings.

Deutsche's strongest businesses has held out well in Europe's extended economic downturn. The company has retained its position as the global market share leader in fixed income for a third consecutive year, according to the industry benchmark study by Greenwich Associates.

The bank captured a 10.7 percent share of the global fixed income market in 2012.

(Reporting by Edward Taylor; Editing by Tom Pfeiffer)

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