Deutsche Bank is to rein in global trading ambitions to put more emphasis on profitability than size at its core bond trading business where a sharp drop in revenues contributed to a big fourth quarter loss.

The €1.15 billion ($1.56 billion) loss compounds problems that have dogged Germany’s biggest bank over the past year, including a list of lawsuits and regulatory wrangles and the need to shore up its balance sheet.

Co-chief executive Anshu Jain stuck by the bank’s promise to meet its 2015 targets while predicting a tough 2014.

“We are forecasting that 2014 will represent the turning point where the bulk of our legacy losses, litigation and derisking costs . . . will be behind us,” he told analysts in a conference call yesterday.

Jain said Deutsche’s debt downturn was structural and required shifting activities away from Europe and toward the US and away from size and towards profitability.

“This is a change,” Jain said. “We could afford to carry those businesses in the past, we no longer can.”

Deutsche’s shares fell 6 per cent in response to the unexpected loss. This compared with a decline of 0.8 per cent in an index of its peers. The bank, which published the results on Sunday, had originally been set to report on January 29th.

Revenue at Deutsche’s debt-trading business, which accounts for nearly three quarters of its trading revenue, fell by almost a third, much more than at US rivals which also suffered from a bond trading slowdown ahead of a cut in the Federal Reserve’s bond buying to help the US economy.

At Goldman Sachs and Citi, for example, revenue from bond trading fell 11 per cent and 15 per cent respectively in the fourth quarter.

Deutsche, one of Europe’s major bond trading houses, has been able to vacuum up business from rival banks that are scaling back. But tougher regulatory demands have forced it to shed assets itself. – (Reuters)