Germany’s Deutsche Bank and Switzerland’s UBS are still suffering from the cost of cleaning up the banking industry.
Third-quarter results from both included unexpected hits for potential legal costs.
Deutsche Bank, which is Germany’s largest lender, said it was setting aside an additional 1.2 billion euros for lawsuits and fines including over the possible manipulation of benchmark interest rates – such as Libor.
That depressed its quarterly pretax profit to 18 million euros against an expected 642 million.
Deutsche’s litigation reserves – its war chest to deal with potential legal costs – stands at 4.1 billion euros after the charges booked in the third quarter. “We expect the litigation environment to continue to be challenging,” the bank said in a statement, signalling that the worst may not be over.
In Zurich, UBS said the Swiss financial regulator has forced it to hold extra capital in case of “litigation, compliance and other operational risk matters” which means it has had to delay meeting a key target for its earnings of a15 percent return on equity (ROE) by 2015. That traget will be pushed back by at least a year
UBS did swing back into profit from the same period last year thanks to a huge restructuring.
Its third-quarter net profit was 577 million Swiss francs (467 million euros).
UBS said it was reviewing how it traded foreign exchange due to a probe into alleged manipulation in the $5.3 trillion-a-day FX market, first disclosed by Switzerland’s regulator.
The bank said it had taken and would continue to take “appropriate” action in respect to staff as a result of the ongoing review. It did not elaborate.