Deutsche Bank calls for patience after $ 1.5 b loss

AFP: Troubled German banking giant Deutsche Bank last week asked for patience after reporting its second annual net loss in a row, saying it was laying the foundations for durable success in the future.

“The year 2016 was not a bad year,” chief executive John Cryan insisted at a press conference in Frankfurt. “We made huge progress.”

“2016 was a year of small steps. But there were many of those small steps, even if most of them don’t yet show up in the results,” the CEO added, referring to the massive restructuring launched shortly after he took the helm in summer 2015.

Deutsche reported a net loss of ¤ 1.4 billion euros ($ 1.5 billion) for the year, struggling with the impact of mammoth fines, lower revenues and restructuring costs.

Like its rivals, Deutsche continues to face headwinds from low interest rates as well as increased regulation and higher capital requirements introduced in the wake of the financial crisis.

But the lender was also battered by a fresh series of fines in 2016 that took deep bites out of its result.

The result is worse than the ¤ 200 million loss forecast by analysts FactSet, but an improvement on the nearly seven-billion-euro loss recorded in 2015.

Looking beyond the net result, Deutsche saw revenues shrink by 10% in 2016 compared with the previous year, at just over ¤ 30 billion.

Meanwhile, the bank’s underlying, or operating result before interest and taxes was ¤ 810 million in the red.

Deutsche’s result also continued to be burdened by provisions the bank has set aside to cover credit risks, which grew 45 percent compared with 2015 to almost ¤ 1.4 billion.

Among other risks, Deutsche is exposed to the struggling shipping sector, which has been floundering since the 2008 financial crisis. The fourth quarter alone saw a loss of ¤ 1.9 billion, affected largely by $ 7.2 billion the bank agreed to pay in fines and compensation in the US over its involvement in the mortgage-backed securities crisis of 2008.

Combined with several smaller legal settlements, the penalty accounted for a 1.6-billion-euro weight on Deutsche’s net result.

Adding to its woes, on Tuesday the bank was hit with yet another penalty as New York and British authorities slapped it with nearly $ 630 million over alleged money laundering in Russia.

But with those looming threats dispelled, even at heavy cost, the bank believes it can look to the future.

“Of course we aren’t happy with the results” in 2016, finance director Marcus Schenck told the press conference. But “we have to sow today if we want a good harvest later. And that requires patience.”

Deutsche pointed to an increase in its capital cushion, required by regulators to see the bank through financial shocks, progress in closing branches and the final winding down of some ¤ 128 billion of risky assets it held in 2012.

Deutsche Boerse, LSE offer clearing house sale to ease merger

AFP: Stock exchange operators Deutsche Boerse and London Stock Exchange (LSE) said Tuesday they would offer to sell French clearing house LCH Clearnet as they push for regulatory approval of their planned merger.

The two firms, whose operations include the London and Frankfurt stock markets, “decided to formally submit the divestment of LCH Clearnet SA by LCH Clearnet Group as a remedy to the European Commission in order to address anti-trust concerns,” they said in a statement.

Plans to offload the French arm of LSE’s clearing house business have been brewing since early January, when the British firm agreed in principle to sell it to European rival Euronext.

If the merger with Deutsche Boerse – in the works since February 2016 – goes ahead, Euronext will buy LCH Clearnet for some 510 million euros ($545 million).

Monday evening was the deadline for Deutsche Boerse and LSE to offer remedy proposals to alleviate Brussels’ competition fears over their tie-up.

Clearing houses are a key part of the infrastructure of markets. They act as an intermediary between buyers and sellers of financial instruments, ensuring settlement of trades.

It remains to be seen whether EU authorities, who opened an in-depth probe in September, will accept the sale as sufficient to assure the deal is waved through.

The proposed deal has drawn sharp rebukes from France, Belgium, Portugal and the Netherlands, fearful for their own stock exchanges, owned by Euronext.

Deep concerns over competition helped scupper two earlier attempts by the companies to merge, in 2000 and 2005.

And Britain’s vote to quit the European Union in June has not helped the merger’s cause, with German regulators reluctant to see the Frankfurt exchange managed from London.