FRANKFURT: Deutsche Bank warned that its new performance targets were at risk from heavy legal charges as it set aside 1.2 billion euros ($1.31 billion) for fines and settlements and reported quarterly earnings largely in line with expectations.
Germany's largest bank by market value said it might not reach its 2020 performance targets, which include a return on tangible equity of over 10 percent compared to 5.7 percent now, should fines and settlements continue to batter the bank's bottom line.
The results are Deutsche Bank's first under new boss John Cryan who has taken over after the early resignation of its co-chief executives Anshu Jain and Juergen Fitschen.
Investors expect Cryan to push for tougher reforms and deeper cost cuts at the bank, which has been hit by a string of scandals and fines.
It is now embroiled in a public dispute with its German supervisor Bafin over its management controls.
The bank's second-quarter pretax profit was 1.2 billion euros, slightly below expectations. It set aside 1.2 billion euros for fines and settlements.
"Our challenges are also evident in the unacceptably high level of our costs, our continuing burden of heavy litigation charges, a balance sheet that must be more efficient, and the poor overall returns to our shareholders," Cryan said in a statement.
Its investment bank revenue rose 23 percent to 4.3 billion euros, fueled by big gains in income from trading stocks and bonds. The division's results were flattered by a 213 million accounting gain in derivatives positions due to hedging.
The bank has been hit by supervisors on both sides of the Atlantic in the past three years and has paid more than 9 billion euros in fines and settlements since 2012, slowing restructuring attempts.
Deutsche was expected to post pre-tax profit of 1.28 billion euros in the quarter compared to 917 million euros posted one year earlier, according to a Reuters poll.
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