Deutsche Bank AG, Europe’s largest bank by assets, said fourth-quarter profit will be “significantly” reduced as it offloads riskier assets and faces higher restructuring costs.
The costs will include valuation adjustments and charges related to global transaction banking in the Netherlands, the lender said in a statement to the Frankfurt stock exchange today. Deutsche Bank was expected to post net income of 509.8 million euros ($670 million) in the period, according to the average estimate of four analysts compiled by Bloomberg.
“We currently expect these specific items to have a significant negative impact on the bank’s earnings in the fourth quarter,” it said. The period “was characterized by a continued difficult macroeconomic environment.”
Deutsche Bank dropped as much as 3.2 percent on the benchmark Stoxx 600 Banks index. It declined 1.8 percent to 33.65 euros at 3:49 p.m., paring gains this year to 14 percent.
“This is a guarded profit warning,” Lutz Roehmeyer, who helps oversee about 10 billion euros of assets including Deutsche Bank shares at Landesbank Berlin Investment, said by telephone from Berlin. “Until now, Deutsche Bank followed a policy of reducing leverage as little as possible. This has changed now.”
The bank is taking bigger losses from de-risking, Chief Financial Officer Stefan Krause said on a conference call with analysts.
Deutsche Bank said it is also assessing impairments and provision levels for the full year. The company reaffirmed 2013 goals for raising capital requirements when stricter Basel III rules are scheduled to be implemented.
“We have effects coming out of resegmentation, effects coming out of goodwill impairment and other effects,” Krause said, referring to their potential impact on earnings. “There will be quite a large amount of things to consider. That could be substantial in nature.”
European lenders are offloading riskier assets and reducing leverage as the recession in Europe persists and they seek to meet new capital requirements under Basel III.