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LONDON – Deutsche Bank posted a loss of €1.4 billion (£1.2 billion) for 2016 on Thursday, citing restructuring and “negative news flow” around a fine from the US Department of Justice.
CEO John Cryan said: “Our results for the year 2016 were heavily impacted by decisive management action taken to improve and modernise the bank, as well as by market turbulence for Deutsche Bank.
“We proved our resilience in a particularly tough year. We finished 2016 with pleasingly strong capital and liquidity ratios and we are optimistic after a promising start to this year,” Cryan said.
Germany’s largest lender said revenue declined 10% to €30 billion “as a challenging market environment and persistent low interest rate environment negatively impacted the business.”
“Furthermore, the downsizing or exiting of a number of businesses as part of the implementation of Strategy 2020 and negative news flow around the DoJ RMBS settlement in October 2016 adversely impacted revenues,” Deutsche Bank said.
Deutsche Bank has tried to simplify its business, cut costs, and reduce litigation and fines from poor conduct, as part of a plan started in October 2015 by Cryan. But the bank has seen its profit margins cut by low central bank interest rates and tougher capital rules.
Shares plummeted close to 30-year lows in September after reports from the Wall Street Journal that the US Department of Justice was looking to impose a $14 billion fine for mortgage-backed security misselling in the run-up to the financial crisis.
The fine would have been more than the Deutsche Bank’s market capitalisation, sparking concerns from clients and investors alike about the bank’s financial stability. The DOJ settlement was eventually finalised at $7.2 billion.
Here are the other main points from the Deutsche Bank results:
The bank’s core capital ratio, a measure of financial resilience, was 11.9% at year-end, up from 11.1% at the end of the third quarter 2016, the strongest for 12 quarters.
Full-year adjusted costs were €24.7 billion, down 6%.
Revenues in global markets, which is Deutsche Bank’s debt, equities and derivatives trading division, were down 13% in the fourth quarter.
Deutsche Bank recently told staff that it was cancelled performance-related bonuses for senior staff, citing “the financial impact of the settlement with the DoJ and our performance for the year.” Earlier this week Deutsche Bank agreed to pay US and UK regulators $628 million to settle claims it failed to stop the bank being used to launder as much as $10 billion out of Russia.
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