Josef Ackermann's reign at Deutsche Bank AG drew to a close with a surprise quarterly loss on Thursday, caused by a slump in bond trading and by writedowns on Greek debt and holdings in drug and gambling companies.
Mr. Ackermann said the bank had sped up court settlements and revaluations at the end of 2011 as a "parting gift" before he hands the reins of Germany's flagship bank to investment banker Anshu Jain and Germany chief Juergen Fitschen.
The bank packed around €1.2-billion worth of one-off charges into the fourth quarter, sparing Mr. Jain and Mr. Fitschen the burden of booking the losses after they take over in May.
Deutsche Bank posted a fourth-quarter pretax loss of €351-million ($461-million) compared with a €707-million profit in the same period the year before. The one-off charges led to a result well below the €1.05-billion profit forecast in a Reuters poll.
"The results are a catastrophe," said analyst Dirk Becker from brokerage Kepler, adding the bank's results would have more or less met consensus without one-off items.
Deutsche Bank's cash cow – revenue from trading debt products – was down 38 per cent in the quarter. The bank also set aside €380-million for litigation in the corporate banking and securities division.
Peers such as Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America have also posted lacklustre trading and investment banking revenue in the fourth quarter as clients shunned capital markets and put off deals.
Writedowns on Deutsche Bank's exposure to pharmaceuticals company Actavis, Cosmopolitan casinos and wealth manager BHF Bank led to a €722-million pretax loss in the corporate investments division.
The investment bank's performance also deteriorated due to "extreme" market conditions as the European sovereign debt crisis spooked its clients. The bank also booked €144-million worth of impairments on Greek government bonds.
Mr. Ackermann warned he saw substantial risk of contagion in case of a disorderly Greek default, adding that he believed a voluntary solution could be found with Greece creditors.
Mr. Ackermann said business remained below year-earlier levels in January.
One bright spot for Deutsche Bank were the so-called "classical banking" businesses such as private banking, cash management and treasury services.
However, a pretax profit of €392-million from asset and wealth management and retail banking failed to offset a €422-million pretax loss from its investment banking unit.
"Cost overrun in the corporate and investment banking division is the key negative message for us," Espirito Santo analyst Andrew Lim said.
Mr. Jain kept a low profile at the group's annual press conference, perched in a row with 13 other executive committee members and smiling as Mr. Ackermann answered the lion's share of the questions. Mr. Jain, who has been criticized in Germany for not learning the language, used a translation service as he sat three seats to the right of the outgoing CEO.
In his decade at the top of Deutsche Bank, Mr. Ackermann transformed it from being a German lender mainly serving industrial companies into an international investment bank with retail banking, asset management and wealth management operations.
Mr. Ackermann, a 63-year-old Swiss, joined Deutsche Bank in 1996 and became CEO in 2002, overseeing four phases of transformation including a shift in strategy with a focus on shareholder value.
When Mr. Ackermann took over, the bank's share price was at about €70. On Thursday, Deutsche Bank shares closed down 0.4 per cent at €33.89, underperforming the sector index which was 1 per cent firmer.
In the early stages of his career, Mr. Ackermann aggressively expanded investment banking and cut Deutsche Bank's dependence on German revenues through global expansion and by unwinding a portfolio of German industrial holdings.
As an advocate of shareholder value, he faced opposition from politicians who said this focus on profitability was not compatible with the "social market economy."
Later, Mr. Ackermann set an ambitious target of raising profitability to a pretax return on equity of 25 per cent, which he first achieved in 2005.
By now, such goals have become harder to achieve as regulators ask lenders to hold more capital reserves to cover potential losses, and Mr. Ackermann said he now aimed for a more modest return on equity of 15-18 per cent.