Handelsblatt Exclusive

Legal Morass Deepens at Deutsche Bank

Der ehemalige Banker Matthias Graf von Krockow kommt am 02.07.2015 am Landgericht in Köln (Nordrhein-Westfalen) an. Die Angeklagten halten am selben Tag ihre Schlussworte. Für den 9. Juli 2015 wird ein Urteil im Sal. Oppenheim Prozess erwartet. Foto: Rolf Vennenbernd/dpa +++(c) dpa - Bildfunk+++
Former banker Matthias Graf von Krockow.
  • Why it matters

    Why it matters

    If Deutsche Bank’s legal problems continue, the costs will keep weighing on profits, hindering its turnaround and pressuring the bank’s managers, including CEO John Cryan.

  • Facts


    • Deutsche Bank has paid more than €12 billion in legal expenses since 2012. Last year, the bank was fined $2.5 billion after managers were found to have manipulated Libor interest rate benchmarks.
    • Sal. Oppenheim, once Europe’s largest private bank, went bankrupt in 2009 and was taken over by Deutsche Bank in 2010.
    • Four managers at Sal. Oppenheim were found guilt by a court in Cologne of aggravated fraud that led to the bank’s collapse.
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Last week’s shareholders meeting at Deutsche Bank saw Chief Executive John Cryan condemn the €5.4 billion spent on legal disputes in 2015 as “unacceptable.”

Germany’s largest bank wants to put these courtroom battles behind it. Mr. Cryan sought to assure that the bank was nearing “finish line” when it comes to settling the largest of its nearly 8,000 legal cases still outstanding. But fresh problems seem to keep sprouting up.

The latest is a dispute over damages. Deutsche is taking up proceedings against the former head of Sal. Oppenheim, a German private bank acquired in 2010. Deutsche Bank is suing Matthias von Krockow, the former chief, for €120 million for his role in driving what was once Europe’s largest private bank into ruin.

But that’s only one of Deutsche Bank’s legal headaches. Another is a potentially even more costly one emerging in its investment banking arm.

According to financial circles, Deutsche Bank is also investigating the role of seven traders in deals where there may have been a conflict of interest. The managers apparently invested $4.5 million of their own money in a trade and made profits roughly eight times their investment, according to estimates by internal investigators.

One was Colin Fan, who was co-head of the Deutsche’s investment banking unit until Mr. Cryan was hired last year. For now, the bank has suspended bonus payments to the managers who are still at the bank as it looks into the deal, which first raised suspicions in 2014.

Legal risk is perhaps the biggest investment risk at Deutsche Bank, which is defending itself against hundreds of legal disputes and last year was fined $2.5 billion for the actions of a group of traders who were in a global ring that manipulated Libor interest rate benchmarks to generate illegal profits.

Mr. Cryan recently warned of more litigation costs to come in the year ahead. At the same time, he told shareholders the bank is heading back on track.

But the two new legal problems may take time to resolve.

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