Deutsche Bank loses nearly €5 billion in Q4
Deutsche Bank, Germany's largest bank, said on Wednesday it expected to incur a massive loss of nearly €5.0 billion in the fourth quarter after market conditions "severely impacted" its sales and trading operations.
The loss of €4.8 billion ($6.37 billion) over the final three months would result in an annual loss of around €3.9 billion, wiping out profits made earlier in 2008.
Its shares plunged by 8.22 percent to €22.27 in midday Frankfurt trading, while the DAX index of leading shares was off by 1.45 percent overall.
"For the full year 2008, the bank currently anticipates a loss after tax in the region of €3.9 billion," the statement said. The result "reflects exceptional market conditions, which severely impacted results in the sales and trading businesses," especially its credit trading and proprietary trading operations, Deutsche Bank said in reference to trading in the bank's own investments.
Measures taken to reduce the bank's exposure to risk and reorganise its operations also contributed to the loss, it added.
Provisions taken by Deutsche Bank against potential losses on loans to bond insurers and other measures reduced its exposure to risky loans and loan commitments from €11.9 billion at the end of the third quarter to below €1 billion three months later, it said.
The bank also reduced its commercial real estate loans "from €8.4 billion to under €3.0 billion in the same period," it said.
Final results for 2008 are to be released on February 5.
Banks worldwide are moving to protect themselves from high-risk investments and reduce their debt, an operation known as de-leveraging. At the end of the fourth quarter, Deutsche Bank said it expected to have a ratio of core capital to overall assets of 10 percent, its published target. That would bring the closely-watched ratio into line with other sound European banks.
Deutsche Bank still planned to pay a dividend of €0.50 per share for 2008, it said.
Dow Jones Newswires quoted Ruland Research analyst Heino Ruland as saying that the bank's outlook was disconcerting, and that even with the "very bad" fourth quarter figures, the end was not yet in sight because more measures have been announced for this year.
Deutsche Bank managed to post a net profit of €414 million in the third quarter of 2008 by using new accounting rules that allowed it to avoid declaring certain assets at market value.
Meanwhile, German press reports say Deutsche Bank wants to renegotiate the terms of its purchase of 29.75 percent of Postbank, which has Germany's biggest retail banking network.
Some of the sum, around €2.79 billion, could now be paid in Deutsche Bank shares, which would mean that the logistics group Deutsche Post, which owns Postbank, could end up with around 10 percent of Deutsche Bank's capital.
Neither Deutsche Bank nor Deutsche Post would comment on the reports. Postbank shares meanwhile were down by 6.90 percent at €13.36 in midday trading.
Because the German government owns 31 percent of Deutsche Post, such a transaction would result in the state taking an indirect stake in the country's biggest private bank.
Last week, Berlin acquired a stake of 25 percent plus one share in the second biggest German bank, Commerzbank, via a cash injection of €10 billion that underscored the fragile situation currently faced by German banks.