FRANKFURT â€" Deutsche Bank said on Tuesday that profit in the third quarter fell sharply as Germany’s largest bank suffered from uncertainty in financial markets and set aside another big sum to cover legal charges.
Anshu Jain, the bank’s co-chief executive, had warned in September that earnings would drop this quarter because of lower commissions from trading in bonds and other forms of debt, one of the bank’s most important businesses.
In addition, Deutsche Bank set aside 1.2 billion euros ($1.65 billion) to cover the cost of legal proceedings, bringing the total reserves for litigation to 4.1 billion euros. Like many of its rivals, the bank is the target of numerous lawsuits and official inquiries, and is one of the institutions suspected of manipulating benchmark interest rates.
Profit in the quarter fell to 51 million euros, from 754 million euros in the same period a year earlier. Revenue plunged 10 percent to 7.7 billion euros, Deutsche Bank said.
“In the third quarter we met several challenges,†Mr. Jain and Jürgen Fitschen, who shares the chief executive job, said in a statement. “We took substantial litigation charges and saw reduced profits in investment banking, leading to a lower quarterly result.â€
Deutsche Bank is the only German bank still able to compete in investment banking with giants like J.P. Morgan and Goldman Sachs, and it is one of the last European banks playing in the big leagues. But like almost all other large investment banks, it is coping with the aftermath of the financial crisis, including its involvement in the subprime mortgage market in America.
The bank said part of the profit decline was due to markets being unsettled as they anticipate the United States Federal Reserve backing off its purchases of bonds. The Fed has been buying bonds to stimulate the American economy.
Revenue from sales and trading, including bonds and other debt, fell by almost half in the quarter to 1.3 billion euros, Deutsche Bank said.
In addition to its investment bank based in London, with a large presence on Wall Street, Deutsche Bank has a substantial network of retail banking branches in Germany. That business has been more stable, but it also lost ground in the third quarter.
Revenue in the private and business clients unit, which includes the German Postbank branch network, fell 5 percent to 2.3 billion euros compared with the third quarter of 2012. Pretax profit in the unit fell 14 percent to 347 million euros.
Deutsche Bank’s capital, the proportion of its own funds that it uses to conduct business in relation to borrowed money, also slipped. Common equity tier one, a measure of capital, fell to 9.7 percent from 10 percent.
The bank’s capital is still well above the levels required by new regulations that will take effect in coming years. But the decline marks a setback for the company, which has struggled to overcome a reputation for being thinly capitalized.
“We’re moving forward, step by step, on our three-year strategic journey of building a world-class platform for Deutsche Bank,†Mr. Jain and Mr. Fitschen said. “Along the way, we have confronted challenges and will meet others in coming quarters.â€
