Deutsche Bank’s provisions for mortgage-related litigation in the US has increased by EUR600 million (US$776 million) from preliminary estimates to EUR2.4 billion, as the lender adjusted figures for its preliminary 2012 earnings and capital ratios under International Financial Reporting Standards (IFRS) rules.
The EUR600 million increase in the litigation provisions is a result of "new developments related to specific existing legal matters" that occurred after Deutsche Bank reported preliminary 2012 results on 31 January 2013.
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Under the IFRS rules, companies have to immediately account for material changes in legal provisions before finalising financial statements.
As a result of the higher provisions, 2012 pretax profit was revised down to EUR784 million, approximately 44% lower than the EUR1.40 billion reported in January. After-tax profit decreased to EUR291 million, approximately 56% lower than the EUR665 million reported.
Deutsche Bank is involved in a number of legal disputes and regulatory investigations, including investigations by regulators into alleged manipulation of interbank offered rates such as Libor, Euribor and Tibor. The lender’s third-quarter earnings report lists nearly two pages of litigation cases related to mortgages and asset- backed securities matters alone.
Out of Deutsche Bank’s EUR600 million increased litigation provisions, EUR500 million stems from provisions previously made for contingent liabilities for which the likelihood of claims has increased. The remaining EUR100 million are new provisions.
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