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The management of Deutsche Bank: Chronology of a chaotic year

Deutsche Bank

The first financial group of Germany and one of banking's references on a global scale faces perhaps the hardest spell in the bank's 58-year long history (after re-emerging in 1957), What has been going on in the last few months at DB?

25 january 2016

2015 will not evoke many good memories within Deutsche Bank. The bank management of the German juggernaut has found itself trapped on several fronts and the solutions provided have not yet brought any semblance of short-term tranquillity to the firm. On top of cutbacks resulting from the alarming third quarter results, there were the disturbances from the Libor scandal, an affaire that has kept around since 2008, and other opaque actions performed between 1999 and 2009. The year 2016 promises to be crucial for the future viability of the firm. Here is the timeline for these last tempestuous months.

 

22 April: DB are fined €2.5 billion for manipulating the Libor, Euribor and Tibor rates between 2005 and 2009.

25-26 April: Deutsche Bank announces both its first quarter results and the next phase in its renewal strategy. Despite increasing total income by 24%, fees resulting from several lawsuits cut the bank’s profits to half compared to the previous term, more than expected. Deutsche Bank stock loses 10% of its market value in the following three days.

27 May: The bank agrees to compensate the U.S. Securities and Exchange Commission in the order of $55 million, for hiding losses during the financial crisis. Here is the inside story from the risk manager that discovered the irregular conduct.

7 June: Co-CEOs of Deutsche Bank, Jürgen Fitschen and Anshu Jain, announce their exit from the organisation forced by the Libor scandal. Bank management rests now in the hands of John Crayn, member of the bank’s Supervisory Board.

9 June: S&P lowers DB’s rating to BBB+ for the first time, along with several other German and European firms.

29 September: Deutsche Bank shares sell at €23.51, their lowest pricing in a year.

18 October: Planned restructuring of the bank starts to take shape. The Corporate Banking and Securities unit will be split into two separate business units, starting in 2016. Also scheduled is the abolishment of the Group Executive Committee as well as 10 of the 16 management board committees.

19 October: Bloomberg reports that a Deutsche Bank junior employee mistakenly transferred 6 billion dollars into a high-risk American hedge fund. Although the transaction was reverted the following day, the bank faces old criticism on the way it prevents risks in its financial transactions.

29 October: Third quarter results are revealed. The bank announces total losses of €6 billion and yearly income reduction by 7%, due to several settlements and write-offs in the valuation of Postbank and Hua Xia Bank, while also anticipating further fines stemming from the Libor scandal. John Crayn announces various unprecedented measures, including: the axing of 15.000 jobs, with 20.000 related to assets to be sold in the following 24 months also scheduled to be cut; the exit of Deutsche Bank from ten countries; and the suppression of dividends until 2017. Provisions for future litigation charges are increased to €1.3 billion. Shares fall nearly 7% in one day.

4 November: Deutsche Bank agrees to a fine of €238 million for transactions made to countries that were the subject of sanctions by the U.S., including Iran, Libya and Syria. The movements took place between 1999 and 2006 at the very least.

8 December: Fitch reduces DB’s rating to A-, the second negative correction of the year.

20 January 2016: One week before issuing their full balance sheet for the year 2016, Deutsche Bank forecasts net losses in the area of €6.7 billion, with a net deficit of €2.1 billion in Q4. All of this, despite increasing revenue from the year 2014. From mid-April, the bank’s market share has been halved.

 
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