Deutsche Bank Trading Revenue Rises as Writedowns Cause Loss

Is Deutsche Bank’s Revamp Enough to Turn it Around?
  • New co-CEO John Cryan to present strategy in London today
  • Bank plans to suspend dividend for 2 years to bolster capital

Deutsche Bank AG said trading income rose 7 percent in the third quarter as co-Chief Executive Officer John Cryan’s clean-up of the bank’s books leads to the largest three-month loss in at least a decade.

Revenue from trading debt and currencies, the investment bank unit’s biggest component, rose to 20 percent to 1.73 billion euros ($1.9 billion) in the period through September, the company said in a statement on Thursday. That beat the 1.57 billion-euro average of eight analyst estimates compiled by Bloomberg.

Germany’s biggest bank posted a loss of 6 billion euros as stricter capital requirements reduce the value of its investment bank and the firm reserved funds for legal costs. Cryan, who became co-CEO in July, is clearing the way for his plan to shore up capital and increase profitability which he will present to investors in London on Thursday.

No Dividend

In the past month, Cryan has reshuffled management and said he’s reorganizing the money-management business as he prepares to cut back the securities unit. The bank on Wednesday said it plans to suspend dividends for two years and resume a payout from fiscal 2017, the first suspension since Germany’s postwar reconstruction.

Deutsche Bank’s securities unit benefited from currency effects, the company said, as the euro declined against the U.S. dollar this year. The company’s investment bank booked about 40 percent of its revenue in North America last year.

Equity trading revenue fell 19 percent to 588 million euros, the company said on Thursday. Equity derivatives sales were significantly lower, reflecting losses on client-driven inventory in the U.S. and Europe, the bank said.

The five biggest U.S. investment banks saw their combined trading revenue decline 8.3 to $16.9 billion in the third quarter from a year earlier, data compiled by Bloomberg show.

Garth Ritchie, who was named head of the trading unit earlier this month, will oversee cuts to parts of the business that consume too much capital or aren’t sufficiently profitable. Anshu Jain, who stood down as co-CEO in June, had planned to shrink assets at the investment bank by as much as 17 percent through 2018 and cut 3.5 billion euros of gross costs across the firm by 2020.

The investment bank unit posted a 2.73 billion-euro pretax loss after the writedowns, the company said.

Deutsche Bank’s unit which caters to consumers and smaller businesses, posted a pretax loss of 3.63 billion euros after a profit of 328 million euros a year earlier after writing the the value of Deutsche Postbank AG, a consumer lender it plans to sell next year.

Transaction banking saw profit rise 22 percent to 402 million euros. That beat the 343 million-euro average of seven analyst estimates compiled by Bloomberg. The business will be moved to a new investment bank unit which also comprises Deutsche Bank’s corporate finance businesses.

The asset and wealth management unit, which is being broken up, saw pretax profit fall 9 percent to 263 million euros in the quarter from a year earlier. That missed the 356 million-euro average of seven estimates.

The bank added about 1.2 billion euros to its litigation reserves in the quarter. The bank is close to settling a regulatory probe into alleged violations of U.S. sanctions laws, probably paying about $200 million, according to a person briefed on the matter.

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