March 29, 2024

DealBook: Deutsche Bank Says Earnings Will Be Weak

Deutsche Bank said Jürgen Fitschen, left, was one focus of a tax evasion inquiry. He is co-chief executive with Anshu Jain, right.Kai Pfaffenbach/ReutersDeutsche Bank said Jürgen Fitschen, left, was one focus of a tax-evasion inquiry. He is co-chief executive with Anshu Jain.

FRANKFURT — Deutsche Bank can’t seem to get a break.

A day after prosecutors raided the company’s headquarters in a tax evasion investigation, Deutsche Bank cautioned that unexpected costs would be a drag on profit. The cost of overhauling a retail banking unit in Germany, coupled with the declining value of some securities, could “have a significant negative impact on the bank’s earnings” in the last three months of the year, the bank said on Thursday.

But Stefan Krause, the bank’s chief financial officer, tried to put the outlook in a more positive light. “This is not seen as a profit warning,” he said in a conference call with analysts. “This is a guidance.”

Mr. Krause also took note of the investigation in the call, but did not address the accusations in detail.

On Wednesday, Deutsche Bank disclosed that Mr. Krause and Jürgen Fitschen, a co-chief executive of the bank, were the focus of an investigation over the value-added tax on the trading of carbon emissions certificates. The inquiry resulted in raids by about 500 police officers, tax inspectors and other officials at the bank’s headquarters in Frankfurt, as well as offices and private homes in Düsseldorf and Berlin. The two executives are subjects of the inquiry because they signed tax return documents.

“The criminal investigation is going on, and it is very difficult to predict when that will be over,” Mr. Krause said.

The bank is dealing with a difficult environment even without pressure from law enforcement authorities.

Like its rivals, Deutsche Bank has been trying to revamp its businesses in the face of a sluggish market and economic weakness. The bank is also moving to reduce risk as new regulations take effect over the next several years. The rules will increase the amount of capital banks must hold against certain kinds of assets.

Deutsche Bank, which is in the midst of closing its books for the year, decided to update investors on the unanticipated costs. Mr. Krause said the bank did not know the amount of those expenses.

“The outcome is still open,” he said. “But there will be quite a large amount of things to consider, which could be substantial and could lead to a loss.”

Some costs relate to an overhaul of Postbank, a Deutsche Bank unit that offers banking services from German post offices. In addition, the bank may need to record losses from debt or other securities that it owns.

The bank announced on Thursday that it would form a new unit focused on winding down investments outside its main businesses. The so-called noncore operations unit will take custody of Deutsche Bank’s holdings of Spanish and Italian bonds, either to sell them or hold them until they mature.

It may be harder for the bank to address the problems with its reputation.

The bank is among the institutions under investigation by the authorities in the United States and Europe over the possible manipulation of benchmark interest rates, like the London interbank offered rate, or Libor. Deutsche Bank said it had set aside money for potential penalties related to the case.

In May, Deutsche Bank agreed to pay $202 million to settle claims by the United States Justice Department that a bank subsidiary had filed false information to qualify for federal mortgage insurance. The bank is also the target of multiple lawsuits in the United States related to its sales of securities linked to the mortgage market.


This post has been revised to reflect the following correction:

Correction: December 13, 2012

An earlier version of this article misstated Stefan Krause’s role at Deutsche Bank. He is the chief financial officer, not the chief executive.

A version of this article appeared in print on 12/14/2012, on page B3 of the NewYork edition with the headline: After Raid, A Warning Of a Drag On Profit.

Article source: http://dealbook.nytimes.com/2012/12/13/deutsche-bank-acknowledges-earnings-will-be-weak/?partner=rss&emc=rss

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