Deutsche Bank stocks have dropped to levels last seen during the 2008 financial crisis as investors are fleeing Germany's biggest lender following its announcement of a multi-billion euro loss for 2015.
Deutsche Bank's pain deepened on Thursday as shares tumbled more than 9 percent in midday trading, following its announcement of a net loss of 6.7 billion euros ($7.3 billion) for 2015.
The bank blamed writedowns, litigation charges and restructuring costs for the plunge, fuelling concerns Germany's biggest lender might now need to raise fresh capital to strengthen its finances.
After surprising markets in October with a record 6.2 billion-euro third-quarter loss, Deutsche Bank said late on Wednesday that it expects its fourth-quarter loss to be about 2.1 billion euros.
"This is the first full-year loss since 2008, which is sobering," Deutsche's co-CEO John Cryan said in a letter to staff on Wednesday.
Currently, Deutsche Bank is embroiled in some 6,000 lawsuits over allegations of money laundering and rate manipulation. Last May, it was fined a record $2.5 billion (4.8 billion euros) for its involvement in rigging interest rates. Now the bank has disclosed full-year litigation provisions of approximately 5.2 billion euros.
Investors now fear the bank will need to raise new capital to meet tougher requirements. In a note on Thursday, London-based Bank Exane BNP said if financial market conditions remain adverse fears for Deutsche Bank's capital base could resurface.
Citibank analysts also see further "downside risk" on litigation. "We model another 3.6 billion euros in 2016 - which is likely to necessitate a capital raise," they told the news agency Reuters, adding that Citi was rating the stock "neutral/high risk" and cutting their price target to 20 euros from 27 euros.
Analysts at Goldman Sachs, which has a "neutral" stance on Deutsche Bank's stock, said they expected litigation issues to persist for a "multi-year period." But even without such charges, the underlying trends looked weak, they added.
Deutsche Bank has been undergoing a massive shake-up after its co-chief executives Anshu Jain and Jürgen Fitschen resigned in June 2015 over a tangle of scandals and missed profit targets and were replaced by John Cryan
Co-chief Cryan was aiming for a fresh start, but the bank remains heavily dependent on volatile trading income. That business was hit hard by challenging market conditions that undercut revenue in the fourth quarter.
In an attempt to trim the bank and make it more profitable, Cryan last year announced 15,000 job cuts and plans to shed businesses employing a further 20,000.
In October, he also warned that the bank was facing two tough years of dividend cuts, pay restraint and harsh restructuring measures, admitting to grave problems in implementing strategic and cultural change.
That month, Deutsche Bank also vowed to take drastic measures after unveiling a record 6.01-billion-euro loss in the third quarter.
"It's all about executing on our plans to build a better Deutsche Bank... about making Deutsche Bank simpler and more efficient," Cryan said at the time.
In Wednesday's statement, Deutsche Bank said it expected to report fourth-quarter revenues of 6.6 billion euros, compared to 7.8 billion euros a year earlier, and full-year revenues of 33.5 billion euros, up six percent on the previous year.
The lender also said it was targeting a capital ratio - a measure of its financial strength - of roughly 11 percent at the end of the fourth quarter. The bank will announce full details of the fourth-quarter and annual results on January 28.
uhe/pad (Reuters, AFP, dpa)