The cracks are beginning to show. The chickens from the $72.8 trillion exposure to derivatives are also yet to come home to roost.
In a late night announcement that shocked analysts, Germany’s biggest bank blamed huge impairment charges of €5.8bn for the unexpected losses. Forecasts had been for profits of around €1bn.
The charges are related to higher capital requirements for Deutsche’s investment bank and the reduced value of its Postbank retail banking division, which is up for sale.
Deutsche also took a €600m writedown on the value of its 20% stake in China’s Hua Xia Bank, which it wants to offload. It bought the stake in 2005 and it is now worth about $3.5bn.
On top of this, the bank is setting aside €1.2bn to cover litigation costs. Like other banks, Deutsche has been caught up in the Libor-rigging scandal, and faces another investigation in Switzerland for suspected price-fixing in the precious metal market.
The charges will push Deutsche into an estimated net loss of €6.2bn between July and September. On a pretax basis the company expects to lose €6bn but excluding the impairment charges, the loss would be €200m.
Full article: Deutsche Bank shocks with warning of €6bn losses (The Guardian)