Deutsche Bank issues massive loss warning

In spite of the surprise announcement, the bank’s share price climbed as investors welcomed Mr Cryan’s new approach as he seeks to clean up the bank. Theyre writing down areas that turned out to be riskier or less profitable than originally expected, essentially saying theyre worth less than before, which would certainly help comparisons in future years look better. 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.

That’s a turnaround from before the global financial crisis, when Deutsche Bank, Goldman Sachs Group Inc. and Bank of America Corp. were among those buying in, often ahead of firms’ listings.

The bank, which has become embroiled in the Libor rigging scandal, also said it had put €1.2bn aside to cover legal costs it is likely to face. He didn’t go into details and said compensation decisions hadn’t been made. Even so, such pay cuts may not be particularly deep, given that he added in his memo, “You have my personal commitment to try to achieve a fair balance between staff and shareholder interests”.

Deutsche Bank has been paying dividends of €0.75 a share in the past six years. The payout hasnt been lowered since 2008. Markets were relieved that the measures would not affect the bank’s capital ratio. The German lender said it no longer considers this stake to be strategic. The Wall Street Journal reported that investor concerns are primarily a result of Deutsche Bank’s stock price performance during the past few years.

We rate DEUTSCHE BANK AG (DB) a SELL. Omahen said that risks were within limits at Deutsche Bank, and that an ambitious cost-cutting program had to be undertaken.

Deutsche Bank is expecting a record pre-tax loss of six billion euros in Q3.

Shares in Germany’s flagship lender fell 3 percent at first, but rallied before dipping 0.6 percent to 25.31 euros by 1323 GMT, valuing it at $40 billion. When Barclays cut payouts for its own investment bankers in 2012, they left in droves. The bank also warned that the final litigation provisions in the quarter may be affected by further events before it finalizes and reports third quarter results.

Of recent sell side updates on the stock, RBC Capital analyst, Fiona Swaffield has rated the stock Sector Perform, with an estimated target price of $32.75.

The bank is set to name a new CEO within the next few months.

Cryan said in July that raising additional equity would not solve the bank’s core problem of low financial returns.