Mounting litigation overhangs compelled
Deutsche Bank AG
) to revise its reported profit figures for 2012. In view of the
rising lawsuit related expenses, the company has come up with
safety measures in order to cushion itself.
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Deutsche Bank enhanced its provisions for litigations by EUR 0.6
billion ($0.8 billion) to EUR 2.4 billion ($3.1 billion). Some of
the provisions are associated with claims which were formerly
announced as contingent liabilities. Due to this, Deutsche Bank's
contingent liabilities for relevant legal and regulatory issues
lessened by an approximate EUR 0.5 billion ($0.6 billion) to EUR
1.5 billion ($1.9 billion).
This adversely impacted Deutsche Bank's previously announced
income before taxes, which reduced by EUR 0.6 billion ($0.8
billion) to EUR 0.8 billion ($1.0 billion). Deutsche Bank's net
income also waned by EUR 0.4 billion ($0.5 billion) to EUR 0.3
billion ($0.4 billion).
Consequently, as of Dec 31, 2012, Deutsche Bank's Basel 2.5
Common Equity Tier 1 capital ratio dipped from 11.6% to 11.4%.
Further, the Bank's Basel 3 pro-forma Common Equity Tier 1
capital ratio declined from 8.0% to 7.8%. However, as of Mar 31,
2013, Deutsche Bank reaffirmed its target for the Basel 3
pro-forma Common Equity Tier 1 capital ratio of 8.5%.
In late 2010, banks that help set interbank lending rates came
under the scrutiny of investigation commissions due to their
suspected involvement in the manipulation of the London Interbank
Offered Rate (LIBOR). Many global banks, which included Deutsche
The Royal Bank of Scotland Group plc
), encountered regulatory probes.
On completion of the investigation, UBS and Barclays had to pay
about $2 billion towards the settlement of manipulation
allegations. On the other hand, Royal Bank of Scotland has been
slapped with a fine of $612 million.
Following this verdict by the investigation commission, Deutsche
Bank anticipates the payment of similar settlement money worth
billions of dollars. In order to shield itself against any crisis
which might arise due to its involvement in the LIBOR
manipulation, Deutsche Bank took steps to harden its legal
These steps are expected to protect Deutsche Bank against any
further setbacks which it might face due to the abovementioned
Deutsche Bank currently retains a Zacks Rank #3 (Hold).