Is the Financial Crisis Still Haunting Deutsche Bank?

Deutsche Bank (NYSE:DB) may have weathered the financial crisis without asking the federal government for a bailout, but that does not mean that the bank has had an easy time of it. The aftershocks of the crisis have forced Germany’s largest lender to restructure its business to meet new banking regulations and face legal proceedings regarding its involvement in the manipulation of the London Interbank Offered Rate interest benchmark, and both restructuring fees and legal costs wreaked havoc on the bank’s fourth-quarter results.

The Frankfurt-based Deutsche Bank reported a large and unexpected quarterly loss on Thursday. For the three months through December, the bank posted a net loss of 2.2 billion euros, or $3 billion. The results highlighted the tough task ahead of Jürgen Fitschen and Anshu Jain, the co-chief executives who began transforming the bank’s business less than seven months ago. When they took control of operations, both men pledged to manage the legacy of the financial crisis severely, reported The New York Times.

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Contributing to the net loss were “significant litigation” charges, the bank said, without offering specifics. However, despite the loss, fourth quarter revenue increased 14 percent, to 7.9 billion euros, from the year-ago quarter…
“This is the most comprehensive reconfiguration of Deutsche Bank in recent times,” Fitschen and Jain said in the earnings press release. They added that “deliberate but sometimes uncomfortable change” lay ahead, and their efforts to change the bank’s culture would take “years not months.”

As part of Fitschen and Jain’s efforts to reform, Deutsche Bank has bolstered the amount of capital held to insure against risk and cut the amount of money needed to cover bad loans. Analysts see the bank as the most leveraged in Europe, and so the bank has made efforts to decrease its risky activities. However, this undertaking has made the bank recognize the reduced value of assets and record losses.

Swiss bank UBS (NYSE:UBS) and Britain’s Barclays (NYSE:BCS) have already reached settlement agreements with regulators over their involvement in Libor.

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