Deutsche Bank 3Q Profit Down 94%

Deutsche Bank AG’s third quarter profit declined to 94 percent owing to fall in debt trading income and 1.2 billion euros ($1.65 billion) set aside to cover up projected legal loss.

Investment banking unit also struggled

 For the three months through September, the net income fell from 747 million euros in the year earlier quarter to 41 million euros. The income was below the 430 million Euro average projections of 12 analysts surveyed by Bloomberg.

Deutsche Bank’s capitalization, popularly called as common equity Tier 1 ratio, decreased to 9.7 percent at the end of September from 10 percent in the last quarter, while the average projection of the seven analysts stood at 10.3 percent. For the investment banking unit, profit fell 68 percent to 345 million euros, which was well below the consensus estimate of 449 million euros.

Deutsche Bank is one of the investment banks facing a slowdown in fixed income trading, an important part of their earnings, as investors Federal Reserve decision over bond purchase. As the economy is recovering and low interest rates are instigating investors to take more risks, Federal officials are in the discussion to lower their $85 billion per month of bond buying or quantitative easing.

Involved in many legal probes

The management of the Europe’s largest investment bank, in terms of revenue, has been compelled to make provisions for settling legal cases related to the firm’s role in rigging inter bank lending rates and lawsuits pertaining to the U.S housing market.

Earlier Bloomberg reported that traders at some banks shared information through messages regarding their positions, initiated their own orders before the client’s orders and also attempted to rig the benchmark. Bloomberg, in August, reported that unusual trading pattern noticed around the same period indicated that dealers were trying to change the benchmarks.

Deutsche Bank told that it is cooperating with regulators who are probing the repo transactions it did for Italy’s third-largest bank, Banca Monte dei Paschi di Siena SpA. Deutsche bank is fighting the claim of fraud and negligence. Other transactions are also being investigated by Italian prosecutors.

 The Germans bank is also facing allegations on legal cases concerning sale of mortgage backed securities, where it is accused of falsely representing the products.