4Q15 earnings review
Deutsche Bank (DB) reported losses of 2.1 billion euros for the fourth quarter. This was in line with a warning issued earlier. For fiscal 2015, Deutsche Bank lost 6.8 billion euros—its first loss since the financial crisis in 2009. In 4Q15, expenses spiked as the bank reported higher restructuring and severance charges as well as litigation charges of 2.1 billion euros. That amount was primarily related to an anticipated settlement tied to mortgage-backed securities. The company’s investment banking division suffered from a “challenging trading environment.” It hampered client activity.
In comparison, its rivals Barclays (BCS) and UBS (UBS) both reported profits for the quarter. European banks (EUFN) have been lagging behind their US (XLF) counterparts when it comes to recovering from the crisis.
Revenues and income
In 4Q15, the revenues were 6.6 billion euros—down 15% year-over-year. For fiscal 2015, the revenues were 33.5 billion euros—slightly higher YoY if measured on the basis of a constant exchange rate. The revenues decline was mainly due to lower revenues in Corporate Banking & Securities and mark-to-market losses in the Non-Core Operating Unit.
Non-interest expenses rose by 24% to 9 billion euros due to high litigation charges and expenses related to restructuring and severance. During the quarter, the bank reported litigation charges of 1.2 billion euros and restructuring and severance expenses of 0.8 billion euros. Deutsche Bank’s cost or income ratio rose to 135%. This is partly due to the exceptional loss. However, the costs are generally high compared to its competitors—even in divisions that weren’t impacted by the loss.
Capital and leverage
The bank’s capital ratios weren’t impacted by impairment of goodwill and other intangible assets charged during the quarter. The common equity tier 1 ratio was 11.1%—4 basis points higher than 3Q15. The decline was mainly due to losses incurred during the quarter. However, the sale of a 19.9% stake in Hua Hin Xia Bank improved this ratio by 50–60 basis points on a pro forma basis. During the quarter, the bank’s leverage ratio declined to 3.5%. This showed the quarterly loss. Risk-weighted assets fell by 11 billion euros to 397 billion euros in 4Q15.