By Thomas Atkins
FRANKFURT (Reuters) - Deutsche Bank posted a surprise pre-tax loss of 1.15 billion euros for the fourth quarter due to heavy costs for litigation and restructuring, and warned that 2014 would be another year of further challenges and reform.
The unexpected loss is likely to compound the problems that have dogged the bank over the past year, especially a lengthening list of lawsuits and regulatory matters, and to redouble pressure on co-chief executives Anshu Jain and Juergen Fitschen to prove their turnaround plan is on track.
In a statement, the German bank said it would meet its 2015 targets but warned that 2014 would again be tough: "We expect 2014 to be a year of further challenges and disciplined implementation."
The bank said that litigation cost it 528 million euros in the quarter, bringing the year's bill for fines and settlements to 2.5 billion euros and lowering its litigation reserves to 2.3 billion euros at year-end.
Deutsche Bank was fined $1.9 billion in December by the U.S. Federal Housing Finance Agency to settle claims that it defrauded two U.S. government-controlled companies in the sale of mortgage-backed securities before the 2008 financial crisis.
It was also fined 725 million euros by EU antitrust regulators for rigging interest rates.
The lender has suffered a hailstorm of criticism in recent weeks, fanning a sense of crisis at Germany's flagship lender as the list of scandals, investigations and negative headlines lengthens, while costly settlements and a downturn in trading revenue weigh on profit.
The surprise loss carries an echo of one year ago, when Deutsche Bank also posted a deep loss in the last quarter of 2012 as restructuring costs sent the bank 2.6 billion euros into the red on a pre-tax basis and virtually wiped out net profit for the full year.
Quarterly revenue for the group fell 16 percent to 6.58 billion euros in the last quarter of 2013, due in part to weakness in its corporate banking and securities division, Deutsche said in a statement.
The bond market had already softened in the third quarter of 2013 as investors braced for higher interest rates, a shift that affected trading, underwriting and investment income for Wall Street banks including Goldman Sachs.
Industry-wide, bond trading has come under pressure due to new regulations that restrict activities such as proprietary trading and others that make it more expensive for banks to trade or hold securities on their balance sheets.
Deutsche's 2013 full-year pre-tax profit rose to 2.07 billion euros, up from the 814 million posted in 2012. Full-year net profit rose to 1.08 billion from 315 million in 2012.
Writedowns in credit, debt and funding produced another 623 million euros in costs, while restructuring costs added a 509 billion euro burden for the last quarter.
The bank was originally scheduled to report results on January 29.
Deutsche Bank's U.S.-listed shares closed down 3 percent at $52.27 on Friday in New York after the Wall Street Journal reported that a profit warning was possible.
(This story was refiled to add dropped word in the first paragraph)
(Reporting by Thomas Atkins; Editing by Kevin Liffey)