From the bank’s website, emphasis ours.
Deutsche Bank reports net loss of EUR 3.9 billion for the year 2008
- Loss before income taxes of EUR 5.7 billion
- Tier 1 capital ratio of 10.1%
- Leverage ratio, per target definition, reduced to 28
- Trading securities reduced by EUR 142 billion or 41%
- Recommended dividend of 50 cents per share
- Fourth quarter loss before income taxes of EUR 6.2 billion; net loss of EUR 4.8 billion
- Frankfurt am Main, February 5, 2009
Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today reported unaudited figures for the fourth quarter and full year 2008 in line with its pre-announcement on 14 January 2009.
For the full year 2008, the bank reported a net loss of EUR 3.9 billion and a loss before income taxes of EUR 5.7 billion. Diluted earnings per share were a negative EUR 7.61, compared to positive EUR 13.05 in 2007. Pre-tax return on average active equity, per the bank’s target definition, was negative 20%, versus positive 26% in the prior year. The Management Board and the Supervisory Board have recommended a dividend of 50 cents per share, compared to EUR 4.50 per share for 2007. The Tier 1 capital ratio, reported under Basel II, was 10.1% at the end of the year, compared to 8.6% at the end of the prior year (reported under Basel I). Tier 1 capital at the end of 2008, reported under Basel II, was EUR 31.1 billion, compared to EUR 28.3 billion at the end of 2007 (reported under Basel I).
For the fourth quarter 2008, the bank reported a net loss of EUR 4.8 billion, compared to net income of EUR 1.0 billion in the fourth quarter 2007. The bank reported a loss before income taxes of EUR 6.2 billion, versus income before income taxes of EUR 1.4 billion in the prior year quarter.
Dr. Josef Ackermann, Chairman of the Management Board, said:
“We are very disappointed at our fourth quarter result, and at the consequent full year net loss in 2008. Operating conditions in the quarter were completely unprecedented, and exposed some weaknesses in our business model. We therefore are repositioning our platform in some core businesses.”
“The Tier 1 capital ratio of the bank has remained at over 10%, in line with target, and is stronger than before the onset of the current crisis. We have reduced our leverage ratio and even exceeded our published target ahead of schedule. We have significantly reduced certain legacy exposures and trading assets, and we have adjusted costs in businesses most directly affected by market turbulence.”
He concluded: “Looking forward, we see continuing very difficult conditions for the global economy, posing significant challenges for our clients and for our industry. Nonetheless, we remain firmly committed to our business model. In investment banking, we are market leaders in areas which have continued to perform well throughout the crisis. We remain convinced of the value and strategic importance of our ‘stable’ businesses. Our strong capital base, liquidity and funding position are also key assets in difficult conditions. We are convinced that Deutsche Bank will emerge successfully from the current crisis. Since the trust and support of our shareholders is critical for us, we recommend a dividend for the year 2008 of 50 cents per share. This reflects our confidence in the bank’s future performance.”
Group highlights below:
Net revenues for the fourth quarter were EUR 885 million negative, versus EUR 7.3 billion positive for the fourth quarter 2007.
In the Corporate and Investment Bank (CIB), net revenues were EUR 3.0 billion negative, versus EUR 4.5 billion positive in the fourth quarter 2007.
In Corporate Banking & Securities (CB&S), net revenues were EUR 3.8 billion negative in the fourth quarter, versus EUR 3.8 billion positive in the fourth quarter 2007. This development reflects negative revenues of EUR 4.8 billion in Sales & Trading, driven by significant losses in key businesses: Credit Trading (both proprietary and customer), Equity Derivatives, and Equity Proprietary Trading. These losses reflect the impact on Deutsche Bank’s business model of unprecedented levels of market volatility, correlation across asset classes, and the breakdown of historically observed relationships between asset classes, compounded by extreme illiquidity, in an exceptionally turbulent market environment. These factors more than counterbalanced significant year-on-year revenue growth in the bank’s Money Market Trading and Foreign Exchange Trading businesses. Revenues in Origination were EUR 938 million, up 84% versus the prior year quarter, predominantly reflecting significant write-backs on leveraged loans and loan commitments related to transactions in which Deutsche Bank’s obligation ceased during the quarter. These write-backs more than offset a significant decline in Equity Origination. Advisory revenues were EUR 152 million, down 52% versus the prior year quarter, reflecting lower volumes of market activity.
In Global Transaction Banking (GTB), net revenues were EUR 751 million in the quarter, up 14% versus the fourth quarter 2007, reflecting record volumes in Trade Finance and Cash Management.
In Private Clients and Asset Management (PCAM), net revenues were EUR 2.0 billion, down 22% versus the fourth quarter 2007.
In Asset and Wealth Management (AWM), net revenues were EUR 588 million, a decline of 47% versus the fourth quarter 2007. This development primarily reflects lower fee and commission income resulting from significant falls in equity markets, lower asset valuations, and reduced client activity during the quarter, combined with lower levels of activity in RREEF, mark-downs on seed capital and other investments of EUR 164 million and injections into certain money market funds of EUR 92 million.
In Private & Business Clients (PBC), net revenues were EUR 1.4 billion, down 3% versus the fourth quarter 2007. Brokerage and portfolio management revenues declined by 39% and 15% respectively, reflecting lower equity market values and reduced client activity against a backdrop of turbulent equity markets during the quarter. This development was partly offset by certain significant gains during the quarter.
For the full year 2008, Group net revenues were EUR 13.5 billion, after mark-downs of EUR 7.0 billion, versus revenues of EUR 30.7 billion, after mark-downs of EUR 2.3 billion, in the full year 2007.
Provision for credit losses was EUR 591 million in the fourth quarter, up 80% versus the fourth quarter 2007, and including EUR 185 million of provisions in respect of loans reclassified in accordance with amendments to IAS 39. In CIB, provision for credit losses was EUR 361 million, up 90% versus the prior year quarter, primarily reflecting provisions in respect of reclassified loans. In PCAM, provision for credit losses was EUR 229 million, up 68%, primarily in PBC reflecting a rise in provision against the backdrop of a deteriorating credit environment and business growth.
For the full year 2008, provision for credit losses was EUR 1.1 billion, up 76%.
Noninterest expenses were EUR 4.7 billion in the fourth quarter, down 14% versus the fourth quarter 2007.
Compensation and benefits were EUR 2.1 billion, down 36% versus the prior year quarter, reflecting significantly lower performance-related variable compensation, driven by lower operating results. General and administrative expenses were EUR 2.3 billion for the quarter, up 10% versus the fourth quarter 2007. This increase reflects additional litigation related charges in the current quarter after net releases of provisions in the prior year quarter, expenses related to consolidated infrastructure investments in RREEF and a provision related to the obligation to repurchase Auction Rate Preferred (ARP) securities / Auction Rate Securities (ARS). These items were in part counterbalanced by value added tax benefits of EUR 112 million in the current quarter. The increase in other non-compensation expenses was driven by impairment charges on certain intangible assets of EUR 572 million in Asset Management during the quarter, which more than offset a credit in policyholder benefits and claims of EUR 204 million in CB&S.
For the full year 2008, noninterest expenses were EUR 18.2 billion, down 15% versus the full year 2007.
Deutsche Bank recorded a loss before income taxes of EUR 6.2 billion during the quarter, compared to income before income taxes of EUR 1.4 billion in the fourth quarter 2007. Per the bank’s target definition, which excludes significant impairment charges for intangible assets of EUR 572 million in the current quarter, the loss before income taxes was EUR 5.6 billion.
For the full year 2008, Deutsche Bank recorded a loss before income taxes of EUR 5.7 billion, compared to income before income taxes of EUR 8.7 billion in the full year 2007.
Deutsche Bank recorded a net loss of EUR 4.8 billion in the quarter, compared to net income of EUR 969 million in the fourth quarter 2007. The effective tax rate for the quarter was 22.6%.
For the full year 2008, Deutsche Bank recorded a net loss of EUR 3.9 billion, compared to net income of EUR 6.5 billion in the full year 2007.
The bank’s Tier 1 capital ratio, reported under Basel II, was 10.1% at the end of the fourth quarter 2008, compared to 10.3% at the end of the third quarter 2008 and 8.6% at the end of the fourth quarter 2007, the latter reported under Basel I. In the current quarter, the Tier 1 capital ratio was negatively impacted by the aforementioned net loss, which was counterbalanced by several measures, including the release of dividend accruals made during the first half of 2008, the conversion of contingent capital, and revisions to pension plan accounting. The bank reaffirmed its commitment to a Tier 1 ratio of approximately 10%. The Core Tier 1 ratio, which excludes hybrid Tier 1 capital, was 7.0% at the end of the fourth quarter 2008, versus 7.5% at the end of the third quarter 2008 and 6.9% at the end of the fourth quarter 2007, the latter under Basel I. Risk-weighted assets were EUR 308 billion at the end of the quarter, versus EUR 319 billion at the end of the third quarter. This reduction was driven by the effects of currency movements as well as reductions in non-derivative products.
Total assets were EUR 2,202 billion at the end of the quarter, up from EUR 2,062 billion at the end of the third quarter 2008. Positive market values from derivatives increased from EUR 727 billion to EUR 1,224 billion, driven by significant market volatility and interest rate movements during the quarter. This development was partly offset by a reduction in trading securities from EUR 347 billion to EUR 205 billion, and in reverse repos/securities borrowed from EUR 286 billion to EUR 168 billion, reflecting the implementation of asset reduction strategies in Sales & Trading businesses. Loans increased from EUR 253 billion to EUR 269 billion during the quarter. The leverage ratio, per the Group’s target definition, further improved to 28 at the end of the quarter.
On those credit trading losses:
Sales & Trading (Debt and other products) revenues were negative EUR 2.7 billion in the fourth quarter 2008, compared to positive EUR 1.6 billion in the fourth quarter 2007.
The fourth quarter 2008 included losses in Credit Trading of EUR 3.4 billion, of which EUR 1.0 billion related to the Credit Proprietary Trading business. The losses in the Credit Proprietary Trading business were mainly driven by losses on long positions in the U.S. Automotive sector and by falling corporate and convertible bond prices and basis widening versus the Credit Default Swaps (CDS) established to hedge them. The remaining losses in the Credit Trading business were driven across many sectors as bonds were sold off and basis spreads widened, driven by significant market de-leveraging and low levels of liquidity.
Further mark-downs of EUR 1.7 billion were taken relating to additional reserves against monoline insurers (EUR 1.1 billion), driven in part by additional specific reserves related to certain insurers, and additional provisions against residential mortgage-backed securities (EUR 244 million), commercial real estate loans (EUR 214 million), and impairment losses on available for sale positions (EUR 58 million).
These losses were partially offset by record revenues in the Foreign Exchange and Money Markets businesses, which benefited from both exceptionally strong client flows and favourable positioning. Deutsche Bank gained market share in Commodities and was ranked as the world’s best commodity derivatives house by IFR Magazine in December 2008.
For the full year, Sales & Trading (Debt and other products) revenues were EUR 124 million, compared to EUR 8.4 billion in 2007. Key drivers of the decline were mark-downs of EUR 5.3 billion, compared to EUR 1.6 billion in 2007, and the aforementioned trading losses in the fourth quarter 2008. These losses were partially offset by record results in Foreign Exchange, Money Markets and Commodities, where customer activity remained strong.
Shares of the German IB were down about 9 per cent at 8:06 a.m. (London time)