Rumours of a huge “rogue” trading position at Deutsche have been circulating for the past couple of weeks now.
And today, this (emphasis ours):
14.01.2009
Release of an Ad hoc announcement according to § 15 WpHG, transmitted by DGAP -
a company of EquityStory AG. The issuer is solely responsible for the content of this announcement.
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Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today announced, on a preliminary and unaudited basis, key elements of its fourth quarter 2008 financial performance:
* Fourth-quarter loss: The bank currently anticipates a loss after taxes in the region of EUR 4.8 billion for the fourth quarter 2008. This development reflects exceptional market conditions, which severely impacted results in the sales and trading businesses, most notably in Credit Trading including its proprietary trading business, Equity Derivatives and Equities Proprietary Trading. The result also reflects exposure reduction and other de-risking measures, a significant increase in provisions against certain of our monoline counterparties, and certain other exceptional gains and charges, including reorganisation charges. In Asset and Wealth Management, the bank anticipates a fourth quarter loss driven by an impairment charge on intangible assets related to DWS Scudder and substantial injections into money market funds.
By any standard, it’s a huge loss.
It remains to be seen exactly how much of it comes from the prop desks. Clearly though, it’s the largest portion (“most notably in…”). Which means the earlier rumours – in terms of the scale of the loss – have a very concrete grounding in reality.
If the prop desks’ realised loss is in the billions, then we can only imagine what the total size of the position would have been in the first place. Something in the tens of billions – as was being speculated in the market last week – would certainly be in the frame.
Which means Deutsche’s traders must have been taking some pretty large directional bets.
The size of the bets, and their presumably rather one-way nature could mean, to our mind, one of two things: they were, a) placed with the complicity of management, or, b) rogue trades.
Either way there’s been a pretty egregious institutional failing.
An analysts call is scheduled at 14:00 CET. DB’s Q4 results in full are still due to be reported on February 5th.
Update 11:18: Deutsche say “definitively” that there is no issue with rogue trading on their prop desks. Looks like last week’s rumours were unfounded in that respect. This loss was very much above board.
Related links:
Analysts: Sell DB – FT Alphaville
Deutsche Bank expects full-year loss – FT