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Deutsche Bank shares drop on big 4th-quarter loss

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January 20, 2014 05:22 AM EST | AP

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FRANKFURT, Germany (AP) — Shares of Deutsche Bank AG fell sharply on Monday after Germany's biggest lender announced a large fourth-quarter loss, largely due to weak investment banking results and the cost of strengthening its finances.

Deutsche Bank shares were down 4.6 percent in early trading at 37.53 euros, making it the worst performer on Frankfurt's DAX index of blue chip stocks.

The bank on Sunday night posted a fourth-quarter net loss of 965 million euros ($1.3 billion), an announcement that came 10 days before it was scheduled to release its results. The figure was below analysts' expectations. Revenues during the fourth quarter were down 16 percent year-on-year at 6.6 billion euros.

The losses showed again how big banks are still struggling to overcome the legacy of the global financial crisis and deal with new regulatory demands in an uncertain economy.

Much of the decline in revenues came from the investment banking division, which suffered a steep fall in income from trading debt securities. The bank has also faced a steady drag on earnings from expenses for litigation and legal settlements resulting from investigations of alleged past abuses. That totaled 528 million euros in the fourth quarter.

The bank suffered 1.1 billion euros in losses on risky investments that it has set aside for disposal as it — along with other banks — faces regulatory pressure to strengthen its finances, a response to the market turbulence of recent years. As the bank gets rid of risky holdings, it improves its capital ratio measuring financial buffers versus the potential losses it could suffer.

Mrket strategist Ishaq Siddiqi at ETX Capital called the results a "nasty set of numbers which have geared investors here in Europe for what could be an ugly earnings season for European banks." He highlighted the decline in revenue from trading fixed-income securities.