Deutsche Bank profit slammed by legal charges


FRANKFURT, Oct 29 (Reuters) - Deutsche Bank posted a 98 percent drop in quarterly pre-tax profit to 18million euros ($24.81 million), below the lowest expectations,weighed by a fall in trading income and a 1.2 billion eurosincrease in litigation provisions.

The whopping legal charges come after rivals like J.P.Morgan and Rabobank set aside billions of dollars todeal with scandals revealed following the financial crisis.

Deutsche's litigation reserves, its war chest to deal withanticipated legal difficulties, rose to 4.1 billion euros in thethird quarter, the bank said in a statement on Tuesday.

Deutsche was expected to post a 43 percent drop in pre-taxprofit to 642 million euros, according to a Reuters poll of nineanalysts. The bank's trading contribution to that was expectedto fall 47 percent to just over 1 billion euros.

"We expect the litigation environment to continue to bechallenging," the bank said in a statement, signalling that theworst may not be over.

Unlike rivals Barclays and UBS, Deutsche Bank has not yetreached a settlement over allegations it was involved in a scamto manipulate global benchmark inter-bank lending rates.

Deutsche said a probe into the bank's activities have thepotential to result in significant financial penalties and otherconsequences for the bank.

More than a dozen banks and brokerage firms, including JPMorgan and Citigroup, are under investigation byregulators over the possible manipulation of benchmark rates --including the London interbank offered rate, known as Libor --which are used to price trillions of dollars' worth of loans.

Revenue from Deutsche's profit engine, sales and trading ofdebt, fell by 48 percent to 1.2 billion euros, compared with theyear-ago period.

Weaker trading income has already hit rivals like CreditSuisse and Goldman Sachs this quarter after theFederal Reserve wrong-footed markets with a decision to continueits bond buying stimulus instead of starting to wind it down.

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