Anshu Jain and Juergen Fitschen have made 2014 a make-or-break year
by sticking to their medium-term growth targets despite a slide in
revenue at their once dominant debt-trading business and mounting
legal bills arising from scandals.
Last year, Deutsche paid out 2.5 billion euros in fines and
settlements, more than halving the amount the bank had in reserve
for such payouts.
The trading environment and regulatory requirements have worsened
since Jain and Fitschen took over in 2012. Germany's financial
regulator, Bafin, is intensifying scrutiny amid apparent displeasure
over how Deutsche is dealing with allegations its traders were
involved in manipulating benchmark interest rates.
Bafin has questioned the rigor and independence of the bank's
internal probe into alleged rigging of Libor, the London interbank
offered rate, according to documents leaked to German media.
It is only the latest in a line of battles between Bafin and
Germany's largest bank. In 2012, the regulator refused to approve
Anshu Jain's first choice as chief risk officer, William Broeksmit.
Broeksmit, who retired from Deutsche a year ago, was found dead at
his London home on Sunday in what appears to have been a suicide. He
was one of Jain's closest allies and a principal actor in Deutsche's
efforts to reduce the size of its balance sheet in the wake of the
global financial crisis.
News of Broeksmit's death disquieted Deutsche staff, already girding
for tough questions at Wednesday's news conference.
The bank was scheduled to release its fourth quarter results on the
morning of the news conference but rushed them out late last week
when it emerged litigation and restructuring costs along with the
slide in fixed income trading had pushed the bank to a surprise
[to top of second column]
Despite the loss, Jain and Fitschen are sticking to the bank's
reform targets for 2015, which include cost-cutting and achieving a
return on equity of 12 percent, six times higher than in 2013.
Deutsche is about one-third of the way through a crash-diet plan
launched in June to cut 250 billion euros ($338.61 billion)from its
balance sheet. The faster the bank trims, the easier it is for the
bank to meet regulators' capital demands.
But with rising legal bills and disappointing earnings, fears of a
dividend cut or capital raising have put Deutsche Bank stock under
The shares are mostly flat compared to 12 months ago, well behind
the 10 percent gain seen in the broader index for European banks
<.SX7P>. Deutsche has a forward price/earnings ratio of 9.1 versus
12.7 for rivals, according to StarMine data, and therefore plenty of
room to catch up.
(Writing by Carmel Crimmins; editing by
Thomas Atkins and David Evans)
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