Lawsuits force Deutsche Bank to restate 2012 profits

Wed Mar 20, 2013 9:20am EDT
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By Edward Taylor and Arno Schuetze

FRANKFURT (Reuters) - Deutsche Bank cut its previously reported 2012 pretax profit by 600 million euros ($773 million) on Wednesday, hit by new charges related to mortgage-related lawsuits and other regulatory investigations.

Europe's biggest bank by assets declined to lay out in detail why it had increased litigation provisions to 2.4 billion euros, forcing it to correct a January 31 earnings report which already showed the worst quarterly loss in four years.

Its shares rose as investors welcomed the efforts to put a figure on the legal and regulatory exposure. The bank said its dividend would not be affected.

Deutsche and several other lenders face a string of lawsuits and investigations related to their role in selling bonds backed by U.S. subprime mortgages.

Clients who bought the mortgage-backed securities from Deutsche feel they were misled about the quality of the assets, which rapidly lost value after the U.S. mortgage market collapsed between 2006 and 2009.

Credit Suisse analysts estimated Deutsche Bank could face litigation costs of $2.1 billion related to U.S. mortgages.

Legal steps taken against other lenders involved in mortgage-related litigation forced Deutsche to revise its legal provisions, sources familiar with the matter said.

The bank increased the provisions because it was more likely that it would have to pay plaintiffs to settle similar disputes and backdate the payments to 2012, the sources said.   Continued...

File photo of the headquarters of Deutsche Bank in Frankfurt December 8, 2011. REUTERS/Ralph Orlowski/Files