Deutsche Bank pretax profit rises as markets focus pays off

Tue Jul 29, 2014 7:52am EDT
 
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By Thomas Atkins and Arno Schuetze

FRANKFURT (Reuters) - Deutsche Bank AG's (DBKGn.DE: Quote) bid to become "last man standing" in European investment banking is working, the bank said on Tuesday, even as the threat intensifies of costly litigation and regulatory actions.

Germany's flagship bank reported a 16 percent year-on-year increase in quarterly pretax income, higher than expectations, as revenue from its huge debt trading operations avoided the harsh downturn that burdened its rivals.

But the specter of expensive legal action cast a shadow over the results, with the bank booking 470 million euros ($631 million) in litigation-related charges, lifting reserves for future litigation to 2.2 billion euros.

Deutsche Bank faces a list of investigations ranging from allegations of manipulating benchmark interest rates to unfairly favoring some investors in off-market trading venues known as dark pools. It has paid 5.6 billion euros over the past two years in settlements and fines and expects to pay 3 billion more this year.

"The pipeline of problems is endless," said fund manager Helmut Hipper at Union Investment, one of Deutsche Bank's top 15 shareholders. "Whether it's currencies, Libor, gold or silver trading, Deutsche Bank has numerous legal risks. That makes things difficult to predict and weighs on the Deutsche Bank share price." The bank said on Tuesday it had received requests for information from regulators related to high-frequency trading and had been named as a defendant in class action complaints alleging violations of U.S. securities laws related to high-frequency trading.

FINES AND SETTLEMENTS

With the threat looming of fines and settlement costs, as well as European banking stress tests year, Germany's largest lender raised 8.5 billion euros in June to strengthen its balance sheet.   Continued...

 
Logos of Deutsche Bank AG are seen in Tokyo July 16, 2014.  REUTERS/Toru Hanai