Fitch tells Deutsche Bank to stick to reforms
FRANKFURT Oct 31 (Reuters) - Fitch Ratings told Deutsche Bank to stick to its reform plans or face a ratings downgrade, piling pressure on Germany's flagship lender to lower costs and trading risks and to wrap up a long list of legal challenges.
The warning followed third-quarter results from the bank on Tuesday that showed 1.2 billion euros in legal charges had wiped out pre-tax profit.
Should Deutsche's efforts to reduce its dependence on volatile trading income or its cost-cutting targets slip, Fitch would consider lowering the bank's so-called viability rating, which measures its intrinsic creditworthiness.
Likewise, should Deutsche's legal costs become unmanageable or its capital base weaken, Fitch said it would consider cutting the rating from its current level of 'a'.
"Any notable slippage in these or any signs that conduct costs could erode the bank's ability to maintain strong capitalisation would put the viability rating under pressure," Fitch said in a statement.
Deutsche and other global investment banks have been caught in a storm of litigation in the wake of the financial crisis. The bank said on Tuesday that it was cooperating with regulators probing alleged rigging in the $5.3 trillion-a-day foreign exchange market.
Deutsche also faces allegations of mis-selling complex financial products and is one of a dozen banks being probed for allegedly rigging benchmark interest rates.
Unlike rivals UBS and Barclays, Deutsche Bank has not yet concluded a regulatory investigation probing potential manipulation of global benchmark interest rates. (Reporting By Thomas Atkins; Editing by Elaine Hardcastle)
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