FRANKFURT (Reuters) — The reputational
risks surrounding Deutsche Bank <DBKGn.DE> have grown and it still
has some way to go to win back public trust and prove it can
overhaul its corporate culture, the bank's two chief executives said
on Wednesday.
Germany's largest lender is facing an array of investigations into
the conduct of its employees and a jump in litigation costs was
partly responsible for a surprise 1 billion euro ($1.37 billion)
fourth-quarter loss that has heaped more pressure on Anshu Jain and
Juergen Fitschen.
"We know that here we have something to prove to you," Fitschen told
reporters at the bank's annual news conference in Frankfurt. "We
have realized that the reputational risk has become more and more
significant."
Deutsche Bank paid about 2.1 billion euros in fines in December, but
fresh investigations — including one into possible manipulation of
the $5.3 trillion-a-day foreign exchange market — have led analysts
and investors to forecast an additional 1.4 billion to 2 billion
euros in settlement costs for 2014 and 2015.
The bank has moved to shake up corporate practices, particularly at
its investment banking operations in London and New York, turning
down deals viewed as too risky, deferring bonuses for dealers and
giving them less leeway on trades.
Deutsche Bank cut pay in its corporate banking and securities
division to 5.3 billion euros last year, down 14.4 pct from 2012.
The number of front office staff in corporate banking and securities
fell 2 percent during the year to 8,435, although the compensation
figure for that division also includes pay for some other staff, the
bank said.
Compensation and benefits across the entire bank was 12.3 billion
euros last year, down 8.7 pct from 2012.
Jain admitted that the more cautious attitude had lost Deutsche
business but said he was happy to pay that price and was confident
that most of the litigation problems would be sorted out this year.
"We are hopeful that towards the end of 2014 we will have the bulk
behind us," he said.
The ability of the duo to oversee the cultural overhaul has met with
skepticism in some quarters, given that Indian-born Jain once headed
the investment bank at the center of many of the current
tribulations and German-born Fitschen has become embroiled in an
investigation into tax evasion.
ACCOUNTABLE
Jain said he was accountable for the mistakes that were made in the
investment bank, particularly during the "very troublesome period"
preceding the financial crisis, but insisted that Deutsche needs his
experience.
German financial regulator Bafin questioned the rigor and
independence of the bank's internal investigation into alleged
rigging of Libor, the London inter-bank offered rate, according to
documents leaked to German media.
Fitschen, however, dismissed talk of a breakdown in Deutsche's
relationship with Bafin.
"Don't be led by the tone of voice of one letter," he said. "There
are intensive exchanges on every subject, and these exchanges can be
described by both sides as open and constructive."
For all its woes, Deutsche has stuck to ambitious earnings goals for
2015. These include return on equity of 12 percent, six times higher
than last year, despite a tough trading environment in its core debt
markets.
The bank is aiming to boost returns by shrinking its balance sheet
and is about a third of the way through a crash-diet plan launched
in June to cut 250 billion euros ($338.61 billion) from its books.
The faster the bank trims, the easier it will be to meet regulators'
capital demands.
Deutsche said on Wednesday that it expects the reduction of non-core
assets to slow this year and that its 2013 dividend will be kept at
the same level as the 2012 payout.
Jain and Fitschen also said they were well-positioned to lead
consolidation in Europe after 2015, though they did not specify when
or where deals would happen.
Bankers in Davos last week said they expect a European Central Bank
(ECB) health check of the euro zone's largest banks this year to
reignite domestic and cross-border merger activity by rebuilding
confidence among lenders.
Jain and Fitschen declined to comment on the apparent suicide of
William Broeksmit, a former senior manager at Deutsche Bank.
Broeksmit, who retired from the bank last year, was found dead at
his home in London on Sunday.
(Editing by Carmel Crimmins, David
Goodman and Eric Walsh)
