Deutsche Bank warns of tough times ahead as braces for U.S. fine

Thu Oct 27, 2016 9:12am EDT
 
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By Arno Schuetze and Anjuli Davies

FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE: Quote) chief John Cryan pledged to redouble restructuring efforts on Thursday, warning that the bank faces tough times ahead as it finalizes talks with U.S. justice authorities over a multi billion dollar fine.

Germany's biggest lender earlier posted an unexpected quarterly profit, benefiting from a modest rebound in bond trading, but failed to dispel the cloud of uncertainty that drove clients to withdraw billions of euros.

Cryan said on a conference call that the quarter had been overshadowed by talks over the U.S. Department of Justice’s settlement proposal relating to sales of RMBS (residential mortgage-backed securities) which had caused uncertainty.

As well as having an impact on investor and client views of the bank, this uncertainty had also taken its toll on "financial planning and strategy execution", Cryan added.

Cryan warned Deutsche Bank employees in a letter that the situation "will stay difficult for a while" and said he was working to finalize the settlement "as soon as possible".

Deutsche Bank would also intensify a major restructuring to counter a deteriorating environment for banking in Europe and elsewhere, Cryan said.

However, a top ten shareholder called on the bank's management to make deeper cuts in its trading activities. "Fixed income is still oversized in terms of cost and on group level there are still 10,000 staff too many."

Despite weeks of negative headlines, Deutsche was able to announce an unexpected net profit of 278 million euros ($303 million) in the third quarter, lifted by a surge in bond trading that boosted all Wall Street banks. [L8N1CW1Z5]   Continued...

 
A Deutsche Bank logo adorns a wall at the company's headquarters in Frankfurt, Germany June 9, 2015.   REUTERS/Ralph Orlowski/File Photo