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Debt trading despair at Deutsche Bank

Monday, January 20, 2014 - 02:09

Jan 20 - Deutsche Bank shares have fallen 5 percent after it posted a surprise pre-tax loss of 1.15 billion euros ($1.6 billion) for the fourth quarter. As Sonia Legg reports, Germany's biggest lender has also warned 2014 will be another year of challenges and reform.

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Many of the problems facing German's biggest bank are well known. But news of a fourth quarter pre-tax loss of 1.15 billion euros still came as a shock to many Deutsche Bank investors and shares fell five percent. Oliver Roth is a trader in Frankfurt. (SOUNDBITE) (English) CLOSE BROTHERS SEYDLER BANK AG TRADER, OLIVER ROTH, SAYING: "They have a lot, a bunch of problems, first of all, the scandals going on, like Libor, for example or the currency scandal right now. And they have much more concerns about the suits, the filed suits in the USA concerning the financial crisis and the results of it." Deutsche Bank has been battered on several fronts. Litigation in the last quarter topped 500 million euro (528m) bringing the year's bill for fines and settlements to 2.5 billion. Writedowns in credit, debt and funding was even higher (623m) And then there's the cost of restructuring. (509m). It all means another year of missed targets, says Quentin Webb from Reuters Breakingviews. (SOUNDBITE) (English): QUENTIN WEBB, ASSOCIATE EDITOR, REUTERS BREAKINGVIEWS, SAYING: "They're still a long way from where they need to get you. There may be some economic tailwinds in 2014 which will help them get some of the way there but given where they are starting from, given the myriad of distractions that the two chief executives face the feeling within Breakingviews is that this will be a tough target to achieve." Deutsche does hope to meet its trading targets for 2015 but there is sense of crisis surrounding the bank. Quarterly revenue fell 16%. And it's the second time in a year Deutsche has posted a surprise - and large - last quarter loss. ETX's Joe Rundle says the weakening bond market has been partly to blame. (SOUNDBITE) (English): JOE RUNDLE, HEAD OF TRADING, ETX CAPITAL, SAYING: "Deutsche is probable one of the most exposed. A lot of other banks, UBS in particular, have pulled away from fixed income markets. But there's a read across here, certainly to Barclays, which has a large fixed income business and that's probably why we are seeing the stock down this morning." Deutsche's not the only bank feeling the pain of reform and regulation. But it does increase pressure on the co-chief executives to prove their turnaround is on track.