Deutsche Bank profit hit by legal costs

Apr 27, 2015, 3:34 AM EDT
Deutsche Bank headquarters.
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Deutsche Bank has reported a sharp fall in profits after setting aside €1.5bn ($1.6bn; £1.1bn) to cover legal costs and regulatory fines, reports the BBC.

Net income for the first three months of the year was €559m, down by a half on a year earlier. Revenue rose by almost a quarter to €10.4bn. The bank had already disclosed it had set aside the €1.5bn.

The results come just days after the bank was fined €2.3bn for trying to manipulate inter-bank lending rates.

The sharp jump in revenue to "near record levels" reflected a "strong performance across businesses and a favourable impact of foreign exchange movements", the bank said in a statement. Revenue at the bank's asset management division was up 30% at €1.4bn, while revenue at the corporate banking arm rose 15% to €4.7bn.

The $2.5bn fine by US and UK regulators related to Deutsche's attempts to manipulate the Libor and Euribor rates. At the end of March, the bank had €4.8bn set aside in "litigation reserves". It is a record penalty for such misconduct because Deutsche tried to mislead regulators.

The bank said it "deeply regretted" the matter.

The bank also said it would reduce annual costs by a further 3.5 billion euros ($3.8 billion), cut back its ownership in the Postbank consumer unit and shrink the securities business to revive profitability, reports Bloomberg News.

Deutsche Bank aims to achieve a return on tangible equity of at least 10 percent in the medium term, the Frankfurt-based company said in a statement Monday, scrapping its previous profitability goal.

It will reduce the number of countries or local presences by as much as 15 percent by 2020 and close up to 200 branches.

Co-Chief Executive Officers Juergen Fitschen and Anshu Jain are implementing their biggest strategic overhaul of their three-year tenure after failing to meet previous targets.