Deutsche Bank Posts Lower Profits Weighed Down By Legal Costs

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Deutsche Bank Posts Lower Profits Weighed Down By Legal Costs
By Deutsche Bank AG (GIF format logo) [Public domain], via Wikimedia Commons

Deutsche Bank AG (NYSE:DB) (ETR:DBK) reported its second quarter earnings before opening bell this morning, reporting slumping profits because of legal costs incurred during the quarter. Net income fell 49 percent to €334 million, compared to €659 million in the same quarter a year ago.

Deutsche Bank Posts Lower Profits Weighed Down By Legal Costs

Analysts polled by Bloomberg were expecting the bank’s net income to be €767.6 million on revenue of €8.4 billion. Shares fell as much as 4 percent in pre-market trading at the New York Stock Exchange and 5 percent in Frankfurt as the stock approached its largest losses since February. Today’s share price decline has slashed the stock’s increase by more than half so far this year.

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Deutsche Bank drops cash on legal costs

Deutsche Bank AG (NYSE:DB) (ETR:DBK) reported that it set aside €630 million for legal costs as it defended a number of court cases and regulatory investigations around the globe. That amount was much higher than expected. The bank set aside €3 billion for additional litigation expenses going forward because of the higher than expected amount.

The bank said it expects settlements will accelerate in the next few quarters. The bank has been investigated by regulators for accusations of Libor manipulation and faces a number of civil suits because it was an issuer or underwriter of U.S. residential mortgage-backed securities. Deutsche Bank AG (NYSE:DB) (ETR:DBK) also said it is one of at least 12 banks that could face a fine from the European Commission in connection with antitrust issues.

Deutsche Bank AG (NYSE:DB) (ETR:DBK) saw its debt trading income decline 11 percent to €1.9 billion while revenue from underwriting securities rose 67 percent to €622 million. Investment banking revenue as a whole increased 9 percent.

Deutsche Bank announces leverage plan

Like Barclays, Deutsche Bank also announced its leverage plan, which calls for cutting its assets by €250 billion. This will help lower the bank’s leverage and bring pretax profits approximately €300 million lower. At the end of June, the bank had€1.58 trillion on its balance sheet, accounting for capital requirements in Europe.

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