FRANKFURT • Deutsche Bank has said it will report a record pre-tax loss of €6 billion (S$10.6 billion) in the third quarter and will cut or skip dividend payments for 2015.
Chief executive officer John Cryan took control in July with a promise to cut costs. He is accelerating plans to shed assets and exit countries and is preparing plans to axe about 23,000 jobs, or a quarter of the bank's staff, sources told Reuters last month.
"The news is not good, and I expect a number of you will be very disappointed by it," Mr Cryan said in an open letter to staff. He said he may eliminate a dividend that has stood since Germany's postwar reconstruction as he tries to overhaul the bank without asking shareholders for more capital.
Europe's biggest investment bank said it is writing down the value of its two largest divisions and boosting reserves for legal costs, including investigations into possible manipulation of benchmark currency rates and dealings with Iran. This will probably lead to a third-quarter loss of €6.2 billion, it said.
"The dividend had been seen as holy for the last few years, but this is a positive," said Mr Christian Hamann, an analyst at Hamburger Sparkasse. "The writedowns show that the business just isn't as profitable any more. It is really welcome that they're dealing with legacy issues as that's a sign of strength."
Mr Cryan, 54, wrote in the memo posted on the firm's website that the writedowns and dividend recommendation "have to be factored in some way into our upcoming decisions on variable compensation for the year".
Final decisions on bonuses have not been made yet, he said. "You have my personal commitment to try to achieve a fair balance between staff and shareholder interests," he added.
Deutsche Bank said it may cut or eliminate the annual dividend, which was 75 US cents (S$1.06) for last year. The company has paid a dividend since at least 1957, when Deutsche Bank was re-established as a centrally managed financial institution. The payout has not been lowered since 2008.
The bank will release details of its plan and final figures for the third quarter on Oct 29.
"The task facing new management is very demanding," Goldman Sachs analysts wrote in a note to clients. "Litigation issues do not end with this markdown - we expect them to persist for a multi-year period. We do not see this as a 'clean-up' but rather an indication of what the 'fixing' of Deutsche Bank will entail over the 2015-18 period."