Deutsche Bank hit by second year of huge losses

Troubled German banking giant Deutsche Bank on Thursday reported a net loss of €1.4 billion for 2016 as it struggles with the impact of mammoth fines, lower revenues and restructuring costs.

Deutsche Bank hit by second year of huge losses
Photo: DPA

The fourth quarter alone saw a loss of €1.9 billion, affected largely by $7.2 billion the bank agreed to pay in fines and compensation in the US over its involvement in the mortgage-backed securities crisis of 2008.

The Frankfurt-based lender was last month forced to slash bonus payments for a quarter of employees, as it continues to face headwinds from low interest rates as well as increased regulation and higher capital requirements introduced in the wake of the financial crisis.

The result is worse than the €200 million loss forecast by analysts FactSet, but an improvement on the €7 billion loss recorded in 2015.

The US settlement was the largest payout any financial institution has so far paid for misconduct relating to the 2008 crash, but well below the initial $14-billion demand from the US Department of Justice.

Adding to Deutsche Bank's woes, on Tuesday it was hit with yet another penalty as New York and British authorities slapped it with nearly $630 million over alleged money laundering in Russia.

Chief executive John Cryan has launched a tough restructuring plan to shed 200 branches in Germany and some 9,000 of its roughly 100,000 full-time employees.

“Our results for the year 2016 were heavily impacted by decisive management action taken to improve and modernise the bank, as well as by market turbulence for Deutsche Bank,” Cryan said Tuesday in the bank's results statement.

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German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.