Deutsche's Asset, Wealth Arm Logs Pre-Tax Loss In Q4; Banking Group Also In Red

Tom Burroughes

31 January 2013

Impairments at the asset and wealth management arm of Deutsche Bank, Germany’s biggest bank, meant the AWM unit logged a pre-tax loss in the final three months of 2012 of €260 million , contrasting with income of €211 million a year before.

The Frankfurt-listed bank’s AWM arm reported net revenues of €1.1 billion in the fourth quarter, down from €1.272 billion in the same period last year. The cost-income ratio of this division surged to 123 per cent in Q4, up from 81 per cent a year earlier.

Non-interest expenses rose by €403 million, or 42 per cent, compared to a year before, mainly driven by Scudder -related impairments of €202 million, IT-related impairments of €90 million as well as litigation related charges, partly offset by the aforementioned effects related to Abbey Life.

In the private and business clients unit, pre-tax income was €287 million, down from €325 million a year before. Net revenues fell to €2.403 billion from €2.578 billion a year earlier.

Loss

Across the bank as a whole, Deutsche warned last December that fourth quarter results are likely to be hit significantly by a number of one-off items and spending programmes, although it said it was confident of hitting targets. In today’s statement, the bank said it posted a loss, before reported tax, of €2.569 billion, compared with a loss of €351 million a year before. Revenues actually rose to €7.868 billion from €6.899 billion a year earlier.

The bank has already set up a “non-core” operations unit and is embarking on measures to return to profitability.

“Management proceeds with implementation of new strategy, including establishing a non-core operations unit and executing operational excellence programme ,” the bank said.

“Actions taken are reflected in specific accounting effects, notably impairments of goodwill and other intangible assets and further specific charges. The results were also impacted by significant litigation-related charges,” Deutsche said.

Deutsche Bank said it has achieved a pro-forma Basel 3 fully-loaded Core Tier 1 capital ratio – the latest Basel bank measure of capital adequacy - of 8.0 per cent at 31 December last year and the firm aims to achieve 8.5 per cent by 31 March.

At its wealth management side, the bank has recently announced it is integrating businesses in Switzerland to cut costs and boost margins. The entire business will be bundled under the umbrella of Deutsche Bank Ltd, involving the full integration of Bank Sal. Oppenheim jr & Cie , its group subsidiary, which will be completed by the end of 2013.