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Inside Deutsche Bank’s Losses in 2015

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Deutsche Bank losses in 2015

Deutsche Bank (DB) reported losses of 2.1 billion euros, or about $2.35 billion, for 4Q15, which was in line with expectations. For 2015, Deutsche Bank’s losses were 6.8 billion euros, or $7.6 billion, its first since the financial crisis of 2009. Fourth quarter expenses spiked as the bank reported higher restructuring and severance charges as well as litigation charges of 2.1 billion euros, or about $2.35 billion. That amount was primarily related to an anticipated settlement tied to mortgage-backed securities.

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The investment banking division of the company suffered from a “challenging trading environment” hampered client activity. In comparison, rivals Barclays (BCS) and UBS both reported profits for the quarter. Europe banks (EUFN) (FEZ) have been lagging behind their US counterparts when it comes to recovering from the global economic crisis.

Revenues and income

Fourth quarter revenues were 6.6 billion euros, or about $7.4 billion, down by 15% YoY (year-over-year). For the full year, revenues reached 33.5 billion euros, or almost $37.5 billion, which is slightly higher YoY, if measured on the basis of a constant exchange rate.

This decline in revenues was primarily due to the decline in revenues in the Corporate Banking & Securities (CB&S) and mark-to-market losses in the Non-Core Operating Unit (NCOU). Provision for credit losses dropped by 23% to 207 million euros, $231.4 million, due to improved provision levels, continued releases, and non-performing loan sales.

The bank’s non-interest expenses, however, rose by 24% to 9 billion euros, or about $10.1 billion, due to high litigation charges and expenses related to restructuring and severance. During 4Q15, the bank reported litigation charges of 1.2 billion euros, or $1.34 billion, and restructuring and severance expenses of 0.8 billion euros, or about $0.89 billion.

Meanwhile, Deutsche’s cost-to-income ratio has soared to 135%, partly due to exceptional losses, but costs are also generally high compared to competitors, even in divisions not affected by losses.

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