"These Are Extremely Poor Results": Deutsche Bank Reports Titanic $7 Billion Annual Loss

Tyler Durden's picture


When it comes to picking a poster child for everything that’s wrong with Wall Street and the financial industry in general, it’s sometimes difficult to decide just who gets the blue ribbon for “most nefarious.”

Indeed, since 2008 we’ve learned that virtually every systemically important financial institution on the face of the planet has at one time or another engaged in some manner of chicanery be it the manipulation of the world’s most important benchmark rates, the peddling of worthless mortgage bonds, or the rigging of FX markets.

Having said all of that, Deutsche Bank may well qualify as the institution that “best” exemplifies the banking industry’s penchant for greed, corruption, and general malfeasance.

From rate rigging to book cooking to deplorable HR procedures, the German lender has it all and last summer, the bank showed co-CEOs Anshu Jain and Jürgen Fitschen the door amid shareholder pressure to reform the corporate culture and improve performance.

To be sure, new CEO John Cryan has his hands full.

The bank is saddled with mountainous legacy litigation and faces an uphill battle to streamline operations. Back in October, Cryan announced that Deutsche would cut 35,000 positions and exit 10 countries as part of a sweeping overhaul.

Oh, and Cryan also preannounced a massive loss and subsequently scrapped the dividend.

On Thursday, we got the latest bad news out of Deutsche as Cryan reported what he called “sobering” results for 2015. In short, the bank is staring down a net loss of €6.7 billion for the year, the first annual loss since 2008. The shares plunged.

Some €1.2 billion in litigation fees contributed to €2.1 billion in charges incurred during Q4, a quarter in which the securities trading unit underperformed.

These are extremely poor results,” Citi’s Andrew Coombs said in a note, referencing the underlying (i.e. ex-litigation and restructuring) results which showed a pre-tax loss of €600 million for Q4.

“The miss is partly due to revenues of €6.6bn, which are 11% (€0.8bn) below consensus and down -16% yoy,” Coombs writes. “[But] this alone still fails to explain €0.7bn of the underlying miss,” he continues, adding that “it would appear that either investment spend has been front-loaded or alternatively (and far more likely in our view) that the bank has also been forced to book elevated credit losses during the quarter.”

Yes, “elevated credit losses.” Imagine that. 

If we had to venture a guess, we'd say those losses are likely to mount going forward given the increasingly precarious environment for credit.

And don't expect the bank's legal woes to go away any time soon either. "We see further downside risk on litigation – we model another €3.6bn in 2016 - which is likely to necessitate a capital raise," Citi goes on to warn.

"Overall, this development confirms our view that the task facing new management is very demanding. Litigation issues do not end with this mark down – we expect them to persist for a multi-year period," Goldman adds. 

Right, so what Citi and Goldman are trying to tell you is that this is an umitigated disaster and a dilutive capital raise is probably just around the corner because the bank apparently did so many things wrong that the litigation is likely to last forever - literally.

Citi cut its price target on Deutsche by a whopping €7 and cut 2015 EPS estimates by 17%.

We wonder if John Cryan is regretting the decision to try and clean up this truly epic mess.

*  *  *

Full PR from Deutsche Bank

Deutsche Bank (XETRA: DBKGn.DE/NYSE: DB) today announced that it expects to incur a number of charges that will contribute to an overall loss for the fourth quarter 2015:

- Expected litigation charges of approximately EUR 1.2 billion, the majority of which are not anticipated to be tax deductible. These provisions are preliminary and may be further changed by events before publication of the bank’s annual financial statements on March 11, 2016 - Restructuring and severance charges of EUR 0.8 billion. These charges are largely related to the Private & Business Clients (PBC) segment. PBC will also take a EUR 0.1 billion charge for the impairment of software

The bank expects to report full year 2015 revenues of EUR 33.5 billion. As a result of the above charges, the bank expects to report a full year 2015 loss before income taxes of approximately EUR 6.1 billion and a net loss of approximately EUR 6.7 billion. The full year results include previously disclosed impairments taken in the third quarter of EUR 5.8 billion of goodwill and intangibles, full year litigation provisions of approximately EUR 5.2 billion and restructuring and severance charges of approximately EUR 1.0 billion.

Challenging market conditions in the quarter contributed to a year-over-year decline in fourth quarter revenues, principally in Corporate Banking & Securities (CB&S). As a result of these revenue developments and the specific charges for the fourth quarter mentioned above, the bank expects to report revenues of EUR 6.6 billion, a loss before income taxes of approximately EUR 2.7 billion and a net loss of approximately EUR 2.1 billion for the fourth quarter.

Deutsche Bank currently expects to report a fully-loaded CRR/CRD4 Common Equity Tier 1 (CET1) ratio at the end of the fourth quarter of approximately 11%. The regulatory capital treatment of the bank’s Abbey Life business has changed in the fourth quarter, resulting in an approximate 10 basis point reduction in the CET 1 ratio. Additionally, the previously announced agreement to sell the bank’s 19.99% stake in Hua Xia Bank is expected to close in the second quarter 2016. This sale, on a pro-forma basis, would have improved Deutsche Bank’s Common Equity Tier 1 capital ratio (CRR/CRD 4 fully loaded) as of 31 December 2015 by approximately 50 to 60 basis points.

All of these amounts are estimates. Details of the preliminary fourth quarter and annual results will be disclosed on January 28, 2016.

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Thu, 01/21/2016 - 14:38 | 7078197 Baron Munchausen
Baron Munchausen's picture

How much exposure does goldman have to them?

Enough that you should sell goldman....

Thu, 01/21/2016 - 14:41 | 7078213 slaughterer
slaughterer's picture

An over-academic bank that makes losses on theoretical quant bets.  DB pretended they could be a global player, and got burned through their crap loan book and derivatives build up.  Most of the people who work for DB are useless parasites without much original insight.  

Thu, 01/21/2016 - 14:45 | 7078230 BurningFuld
BurningFuld's picture

Me thinks Deutsche Bank has been kicked out of the sacred circle.

Thu, 01/21/2016 - 14:54 | 7078270 cheka
cheka's picture

no worries, the holiday bonus pool is already full

Thu, 01/21/2016 - 14:57 | 7078281 macholatte
macholatte's picture

The Morons own the .gov politicians, ignore laws, never get prosecuted and yet they can’t make money at 0% or even NIRP and simply print 90% of what they use. Clearly they are just a bunch of fuck-ups who hold the world by the balls.

The TBTF syndicate MUST be broken up into at least 5 pieces each…. 25+ new banks.

Thu, 01/21/2016 - 15:08 | 7078314 Never One Roach
Never One Roach's picture

Just hold those nasty losses at arms length, and you'll be ok.

Thu, 01/21/2016 - 15:14 | 7078342 Xibalba
Xibalba's picture

Their answer is to open accounts for all the refugees..... :\

Thu, 01/21/2016 - 16:13 | 7078623 Never One Roach
Never One Roach's picture

Merkel unyielding in face of growing revolt over refugees



Thu, 01/21/2016 - 16:08 | 7078608 stant
stant's picture

Does that mean my double wide dealership planned for Frankfort won't work out? Liquidity and all that? They already said no to stants gun shop bastards

Thu, 01/21/2016 - 15:13 | 7078340 mrdenis
mrdenis's picture

Not to worry ...the taxpayers have their backs ......

Thu, 01/21/2016 - 17:32 | 7078974 Mentaliusanything
Mentaliusanything's picture

Deutsche Bank: We Fucked up..... We hearby demand you all give us some more money, and we promise we will invest it wisely.

Fuck you, go die already. 









Thu, 01/21/2016 - 15:55 | 7078551 Hedger4Life
Hedger4Life's picture

Everyone take a bow to Tall Tom!

Nailed this one a while back.

Thu, 01/21/2016 - 14:41 | 7078200 JustObserving
JustObserving's picture

Can not Deutsche Bank make up fictitious results as the major US banks do?

The psin for European banks is going to get much worse as the economy slows and bonds began to collapse staring with Greece, Portugal, Spain and Italy.

Thu, 01/21/2016 - 14:45 | 7078228 NoDebt
NoDebt's picture

Those WERE the fictitious results.  If they showed the real ones it would be accompanied by everybody walking out the front door with their personal belongings in a cardboard box.  And we can't have that Lehman-esque moment repeated on TV, now can we?

Thu, 01/21/2016 - 14:51 | 7078258 Bay of Pigs
Bay of Pigs's picture

Exactly. They have been Dead Man Walking for several years.

Thu, 01/21/2016 - 14:52 | 7078267 Amish Hacker
Amish Hacker's picture

The only thing temporarily postponing that happy moment is the fact that the world's largest derivative book is hidden off balance sheet.

Thu, 01/21/2016 - 14:39 | 7078205 markettime
markettime's picture

Yeah right! The real number is probably more like $700 Billion in losses on deravitive exposure alone. 

Thu, 01/21/2016 - 15:17 | 7078354 SillySalesmanQu...
SillySalesmanQuestion's picture

Ahem, you may have missed a zero there...

Thu, 01/21/2016 - 15:25 | 7078400 gould's fisker
gould's fisker's picture

Açcording to Tyler DB had $75 Trillion derivatives exposure as of a year or so ago, that's with a "T".  Stupid fucks: http://www.zerohedge.com/news/2015-06-12/deutsche-bank-next-lehman

Thu, 01/21/2016 - 14:40 | 7078207 DogeCoin
DogeCoin's picture

The next Lehman.

Thu, 01/21/2016 - 14:44 | 7078224 pods
pods's picture

Haven't seen this shitty of numbers, well, since Lehman.


Thu, 01/21/2016 - 14:57 | 7078279 bamawatson
bamawatson's picture

moments ago

Thu, 01/21/2016 - 15:09 | 7078320 Never One Roach
Never One Roach's picture

The next Lehman...so then do we say, "Worse xyz since Deutsch Bank"?

Thu, 01/21/2016 - 14:44 | 7078225 Winston Churchill
Winston Churchill's picture

Deutsche Bombe.

Thu, 01/21/2016 - 15:05 | 7078245 hound dog vigilante
hound dog vigilante's picture

Hey Winston - glad I caught you here...

A few days back you mentioned (on another thread) a possible 'deal' involving Iran and the petrodollar, implying that either Iran is 'out' and will sell it's oil for yuan/rubles/gold, or they are 'in' and Iran will sell it's oil in $USD.

Could you elaborate on your hypothesis, as it wasn't clear what you were implying...?


Thu, 01/21/2016 - 15:07 | 7078311 Winston Churchill
Winston Churchill's picture

That the Iran 'deal" is contingent on a secret agreement to only sell Iranian oil in USD.

I'd bet a lot of money on it. I'd also bet that once those frozen Iranian assets are repatriated

(@ only $3bn per month I read) that the Mullahs will tear up that sidebar deal.

Kicks the petrollar can a little way, but oil is fungible.Iran also already has nukes, which is

why they didn't get the Iraq/Libya treatment.


Thu, 01/21/2016 - 15:29 | 7078425 OCCULTARE
OCCULTARE's picture

There is no such deal and Iran still does not have nukes but what it has is real conventional counterpunch capabilities.

Russia likely saved Iran's bacon along with the fact the US lacks the military might to occupy it.

Iran is very likely under Russia's nuclear umbrella... russia knows that it, and its own oil/gas/gold are on the menu next.

Thu, 01/21/2016 - 15:48 | 7078518 hound dog vigilante
hound dog vigilante's picture

Interesting replies... thank you.

I am keen on the subject of Iran/petrodollar because - given the recency of the Iran deal - I believe this dynamic could be the canary in the petrodollar coalmine, so to speak...  have TPTB already conceded the death of the $USD, or will they fight to the bitter end?

I believe the Iran/petrodollar dynamic offers macro 'timing' insight that other factors do not...

Thu, 01/21/2016 - 16:10 | 7078613 Winston Churchill
Winston Churchill's picture

Whatever helps you sleep at night.

One of the advantages of going to an English Public school, is where your schoolchums end up in life.

High places in govt. being one of them.

I prefer the old school tie moniker, instead of that modern word  networking.

Lets just say I'm very sure, and its not conjecture.

Thu, 01/21/2016 - 19:18 | 7079353 A Man of Wealth...
A Man of Wealth and Taste's picture

Is it that much of a stetch to think that (in light of the fact that the US dominates the IMF) that FRNs/USD will be heavily weighed in the coming SDR preserving a quasi reserve currency status?  Ultimately, when the petrodollar goes, won't it just be petroSDR?

Thu, 01/21/2016 - 19:32 | 7079388 V for ...
V for ...'s picture

My chum tells me the axis shifts to Iran, away from Saudi. It's about money/resources, not politics. The Queen's Household and military are aware and go with it.

Problem: HK oil related derivatives. Kaboom!

Thu, 01/21/2016 - 15:56 | 7078558 hound dog vigilante
hound dog vigilante's picture

I agree that Iran will 'cross' most/all elements of the nuke deal & associated deals... they have tons of incentive to 'cross', and virtually no incentive to 'honor', IMO.

It is my understanding that China (somewhat ironically) is the only player forestalling the rapid death of the petrodollar... ever patient, China wants to have it's (Peking) ducks in-a-row (AIIB, gold, basic materials, mercantile colonialism) before green-lighting overt anti-dollar assaults (by the BRICS, ME, etc.)


Thu, 01/21/2016 - 15:07 | 7078309 Sages wife
Sages wife's picture

"Next Lehman" is the new "since Lehman".

Thu, 01/21/2016 - 14:44 | 7078223 Lady Jessica
Lady Jessica's picture

Remember, in the QE/bailout age, it doesn't matter if it's bad.  It only matters if it's unexpected.

I'd say this was expected (sort of).

Thu, 01/21/2016 - 14:44 | 7078226 Silverhog
Silverhog's picture

I guess really really shitty news is still good news. 

Thu, 01/21/2016 - 14:45 | 7078231 hound dog vigilante
hound dog vigilante's picture


Thu, 01/21/2016 - 14:46 | 7078234 besnook
besnook's picture

banks are eating their own brothers. there might be a lehman in this afterall.

Thu, 01/21/2016 - 14:49 | 7078246 dogismycopilot
dogismycopilot's picture

Bloody hell. Much worse than I expected. I met one of their bond IBs Partner who was working on their Iraq deal back when Iraq had hope. Poor bastard is either fired or popping Xanex like candy.

Oh well, they can hire some Syrian refugees and everything will be ok.

Thu, 01/21/2016 - 14:49 | 7078251 Good bi bull
Good bi bull's picture

All those PIGS loans are starting show up now. They are not the only EU bank with exposure.

Thu, 01/21/2016 - 15:29 | 7078424 upWising
upWising's picture

And when will US Banks start to show equally as "impressive" results?  It's not like they have any exposure in Shale Oil!

You ask about the PIIGS (Portugal Italy Ireland Greece Spain).

What about our own PRICKs?  (Puerto Rico, Illinois, Connecticut, Kentucky)?

Thu, 01/21/2016 - 14:50 | 7078256 PTR
PTR's picture

A 7 billion dollar loss.  Billion with a "b."  I don't even want to know how big the overall spreadsheet is.

Thu, 01/21/2016 - 14:51 | 7078257 The Gladiator
The Gladiator's picture

we model another €3.6bn in 2016 - which is likely to necessitate a capital raise.




Bailout anyone?

Thu, 01/21/2016 - 14:53 | 7078269 Seasmoke
Seasmoke's picture

Bail in everyone.

Fixed it./

Thu, 01/21/2016 - 14:51 | 7078262 Colonel Klink
Colonel Klink's picture

Fuck Douche Bank! /thread

Thu, 01/21/2016 - 14:52 | 7078264 Seasmoke
Seasmoke's picture

Bank of America is glad to hear this. Squirrel !!!

Thu, 01/21/2016 - 14:53 | 7078268 Fuku Ben
Fuku Ben's picture

Tyler, you forgot the money laundering allegations. No global bank would be complete without it.

Thu, 01/21/2016 - 15:01 | 7078292 PontifexMaximus
PontifexMaximus's picture

Who the hell cares? They will open up their doors tomorrow, same as Banca MPS in Italy will do although they already were bankrupt t last year. So, business as usual, nothing to worry about.

Thu, 01/21/2016 - 15:04 | 7078302 commishbob
commishbob's picture

Far, far worse than Lehman.

Lehman was a daisy cutter.

Deutsche is a nuke. 

Thu, 01/21/2016 - 15:06 | 7078307 vegas
vegas's picture

Loss due to climate change no doubt; tax the rich refugees into Germany for capital. Seems obvious solution to me.



Thu, 01/21/2016 - 15:06 | 7078308 lolmao500
lolmao500's picture

When DB goes down, Germany goes down. Merkel hangs.

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