BERLIN - Germany's biggest lender Deutsche Bank braced its employees for bonus cuts after it announced its biggest quarterly loss in about a decade and warned that even dividends could be scrapped.
Deutsche Bank is embroiled in the Libor rigging scandal and is being investigated by Swiss authorities for suspected price fixing on the precious metals market.
The troubled bank has been undergoing a massive shake-up after its co-chief executives Anshu Jain and Juergen Fitschen resigned in June over a tangle of scandals and missed profit targets.
The investment and retail bank is mired in around 6,000 different litigation cases and was fined in May a record $2.5 billion for its involvement in rigging interest rates.
In a letter announcing the huge third quarter loss to employees, new co-chief executive John Cryan said the profit warning would "have to be factored in some way into our upcoming decisions on variable compensation for the year".
"While compensation considerations are not based on this year’s financial results alone, our shareholders will rightly expect employees to share something of the burden," he wrote.
Cryan added that the bank planned to give details of a restructuring plan at the end of October.
The group has warned that it would have to slash or even eliminate dividends for the year as it said losses for the third quarter would pile up to 6.2 billion euros.
If the group does end up dropping dividends for the year, it would be an unprecedented move given that the bank continued paying out dividends even at the height of the 2008-2009 financial crisis.
Litigation costs
Deutsche Bank said its third quarters earnings had been hit partly because it was setting aside another 1.2 billion euros to meet litigation costs.
The bank is being investigated by Swiss authorities for suspected price fixing on the precious metals market.
In another thorny case, its Moscow branch is being probed by US authorities on suspicion of possible involvement in money-laundering. Bloomberg reported the case involved some $6 billion in transactions over four years.
Besides litigation costs, the bank said its earnings for the three months ending September is expected to take a hit over write-downs totalling 5.8 billion euros due to tougher regulations on capital requirements.
Its planned disposal of subsidiary Postbank, which is to be floated on the stock market, also contributed to the significant charge.
The bank further booked a write-down of 600 million euros in the value of its almost 20% stake in Hua Xia Bank.
In what appeared to be a confirmation of reports that it was intending to dispose of the stake in the China-based bank, Deutsche Bank said there had been a "change of the intent of the holding" and that it "no longer considers this stake to be strategic".
Investors however shrugged off the bad news, with shares in the bank rising 2.24% to 13.48 euros on Thursday.
Deutsche Bank, which employs more than 98,000 people, is due to publish its third quarter results on Oct 29.