Deutsche Bank Says Q4 FX Revenues Down on “Challenging Market Conditions”

The Frankfurt headquartered Bank with multiple business lines reports full-year 2013 preliminary net revenues down 5% over 2012, and a

dblogoThe Frankfurt headquartered multi-national banking conglomerate, under the Deutsche Bank (DB) brand, has reported preliminary full year results for 2013, and fourth quarter metrics, according to an official press release on its corporate website.

From a full year perspective, preliminary results for 2013 were reported at EUR 31.9 billion for Group Revenues which fell 5% year-over-year (YoY) and Core Bank net revenues of EUR 31.0 billion also 5% lower during that time, and both largely attributed to revenue declines in Corporate Banking & Securities (CB&S).

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Results were mixed with a series of charges that significantly impacted revenues in certain segments, totaling EUR 1.3 billion in cost adjustments and litigation expenses.

Group Revenue by Quarter and FY 2013 vs 2012 [source: www.deutsche-bank.de]
Group Revenue by Quarter and FY 2013 vs 2012 [source: www.deutsche-bank.de]
Group income before income taxes (IBIT) of EUR 2.1 billion was up 154% from 2012, and IBIT for Core Banking – which excludes the Non-Core Operations Unit, of EUR 5.3 billion, was up 41%, over 2012. The bank reported Q4 Group Revenue of EUR 6.6 billion down 16% YoY, or lower over Q3 by EUR 1.16 billion, and a loss before income taxes of EUR 1.2 billion for the fourth quarter of 2013.

The full audited 2013 Annual Report is expected to be released on 20 March, 2014, and the Q4 2013 Financial Data Supplement is anticipated on January 29, 2014.

Jürgen Fitschen and Anshu Jain, Co-Chief Executive Officers, Duetsche Bank
Jürgen Fitschen and Anshu Jain, Co-Chief Executive Officers, Deutsche Bank

Commenting in the official press release, Jürgen Fitschen and Anshu Jain, the two Co-Chief Executive Officers of Deutsche Bank said, “2013 was the second successive year in which we have invested in the bank’s future growth and in further strengthening our controls while addressing legacy issues. These factors impacted our financial results. Nonetheless, underlying core business profitability was amongst the highest of the past decade, and we have made Deutsche Bank fitter, safer and better balanced. We expect 2014 to be a year of further challenges and disciplined implementation; however, we are confident of reaching our 2015 targets and delivering on our strategic vision for Deutsche Bank.”

This short-term/long-term outlook from the co-CEO’s also reflects in the ratings from credit agencies that DB lists on its website, showing 2014 expectations less optimistic than 2015 longer-term outlooks.

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According to the official press release, the decline in Q4 reported metrics largely reflected weaker results in Corporate Banking & Securities (CB&S) and a smaller decrease in Global Transaction Banking (GTB) revenues. Quarterly revenues in Deutsche Asset & Wealth Management (DeAWM) were up 8% and unchanged in Private & Business Clients (PBC) from the prior year period. The EUR 95 million IBIT for CB&S in 4Q 2013 reflected lower revenues, as well as litigation costs and cost-to-achieve (CtA) spending related to the bank’s cost reduction efforts.

2013 Q4 Corporate Banking & Securities (CB&S) Segment  [source: www.deutsche-bank.de]
2013 Q4 Corporate Banking & Securities (CB&S) Segment [source: www.deutsche-bank.de]
With Foreign Exchange volumes a significant market share of global foreign exchange trading by the bank, the 27% decline in CB&S revenues from the prior year period was mainly due to challenging conditions to the banks Fixed Income & Currencies business, as FX is carried out in this division under the CB&S segment.

Forex Magnates’ reporters spoke with a DB company spokesperson who explained that no FX related volume figures from its CB&S segment are available as the numbers are still preliminary, and how more information would be available in the full annual report set to follow as noted above.

Debt Sales & Trading quarterly revenues declined 31% from the prior year period, which more than offset 8% revenue growth in Equity Sales & Trading and stable YoY revenues in Origination & Advisory, as per the press release.

Full Year 2013 Results Highlights

  • Group income before income taxes (IBIT) of EUR 2.1 billion, up 154% from 2012
  • IBIT for Core Bank, which excludes the Non-Core Operations Unit, of EUR 5.3 billion, up 41%
  • Group net revenues of EUR 31.9 billion fell 5% and Core Bank net revenues of EUR 31.0 billion were 5% lower, both largely reflecting revenue declines in CB&S
  • Group non-interest expenses of EUR 27.8 billion
  • Adjusted cost base of EUR 23.2 billion for Group, and EUR 21.3 billion for Core Bank were down 6% and 7% respectively
  • Operational Excellence program achieved cumulative savings of EUR 2.1 billion, cost-to-achieve (CtA) was EUR 1.3 billion in the year
  • Litigation expenses of EUR 2.5 billion in 2013 as the bank put many major legacy issues behind it. Litigation reserves were EUR 2.3 billion at year-end
  • Total assets (adjusted) at year-end fell 11% to EUR 1.1 trillion for Group, and Core Bank adjusted assets fell 8% to EUR 1.0 trillion
  • CRD 4 leverage exposure of EUR 1.5 trillion was 14% lower and risk-weighted assets of EUR 355 billion were 11% lower than at end 2012
  • CRD 4 Common Equity Tier 1 capital ratio was 9.7% (fully loaded)
  • CRD 4 leverage ratio was 3.1% (adjusted fully-loaded)
  • Post-tax return on average active equity in 2013 was 2% for the Group and 7% for the Core Bank

Fourth Quarter 2013 Results Highlights

  • Group revenues were EUR 6.6 billion, down 16% from the prior year, largely reflecting CB&S results Group loss before income taxes of EUR 1.2 billion
  • Group IBIT included material charges of EUR 623 million for Credit Valuation Adjustment (CVA), Debt Valuation Adjustment (DVA) and Funding Valuation Adjustment (FVA), EUR 509 million of CtA, and EUR 528 million for litigation
  • Core Bank loss before income taxes was EUR 26 million
  • Core Bank IBIT adjusted for CVA/DVA/FVA, CtA, litigation and Other items in the quarter was EUR 1.3 billion

Shares of Deutsche Bank AG on XETRA traded under the symbol DBK were down 2.58%, around time of publication by Forex Magnates. The news follows just days after reports that Deutsche Bank had let go of Forex dealers, in wake of an evolving global probe into alleged foreign exchange market price manipulation.

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