Deutsche Bank AG’s announcement yesterday that earnings will suffer this quarter added to a cacophony of negative news over the past two weeks that’s increasing pressure on the company’s new leadership.
Two days ago, police raided Deutsche Bank’s Frankfurt headquarters, arresting five employees, in a tax probe involving the sale of carbon-emission certificates that includes co-Chief Executive Officer Juergen Fitschen and Chief Financial Officer Stefan Krause, who signed tax returns. Today, the bank was found partly liable by a Munich court for the collapse of a German media group.
Fitschen and Anshu Jain, his co-CEO, are grappling with escalating regulatory probes and litigation stretching from the alleged rigging of interbank lending rates to claims the bank misrepresented products tied to U.S. mortgages. Resulting fines could cut into the company’s capital levels, the lowest of Europe’s four biggest investment banks.
“Deutsche Bank’s employees, right down to the doormen, must feel like a storm has descended on the company like a typhoon,” said Klaus Fleischer, a professor of banking and finance at the University of Applied Sciences in Munich. “It will be tough to repair the damage, even though Deutsche Bank has done a lot to bring about cultural change in the industry.”
Deutsche Bank said yesterday it expects earnings will be “significantly” reduced in the fourth quarter by losses from offloading riskier assets and higher restructuring costs.
The bank fell as much as 3.7 percent in Frankfurt, heading for the biggest decline in five weeks. It dropped 2.4 percent to 32.54 euros at 3:25 p.m., trimming an advance this year to 11 percent, half the 22 percent gain for the 28-member Euro Stoxx Banks Index.
Fitschen said he “asked questions” before submitting the tax returns in 2010 that included data on the C02 certificates. The difference between that statement and a corrected version in 2011 was about 150 million euros, he said, German newspaper Handelsblatt reported.
“I feel unfairly treated,” Fitschen said in the interview published today, referring to the allegations and the police raid on Deutsche Bank’s HQ. “In my opinion, the prosecutor’s approach was excessive. I also feel that the allegations against me will hinder me from implementing what I plan to do.”
Fitschen, 64, and Jain, 49, took over as co-chiefs from Josef Ackermann, 64 six months ago.