Still suffering from the costs of a clean-up.

Deutsche Bank and UBS' third quarter results unexpectedly took a hit from potential legal costs.

They're both weighed down by allegations about manipulating the Libor inter-bank lending rates - and so are holding more capital.

Germany's flagship lender set aside an extra 1.2 billion euros to deal with possible litigation costs.

That saw its quarterly pretax profit fall by 98% to 18 million euros, far lower than predicted.

Deutsche hasn't yet reached a settlement in the Libor affair.

It increased its litigation reserves to 4.1 billion euros in the third quarter.

Swiss bank UBS third quarter net profit came in above forecasts at 577 million Swiss francs.

But it said it would miss a key profit target because its financial regulator is forcing it to hold more capital in case of further legal costs.

UBS and Deutsche Bank shares both slid after their results.

It shows the uphill struggle faced by Europe's banks as they try to move on from industry scandals.

Brenda Kelly is from IG.

SOUNDBITE: Brenda Kelly, IG Market Analyst, saying (English):

"The capital ratios that will be required by the regulators and of course, the litigation fees for any involvement in the Libor scandal were obviously going to hamper the profits. I think what has also been to the detriment of these banks has been how the Fed really wrong-footed the markets back in May and has had a really big effect on their sales of debt trading, down by 48% in Deutsche Bank. So certainly, a bit of a shocker in terms of their profit fall for Deutsche Bank."

In the UK - Lloyd's set aside another 750 million pounds to compensate customers mis-sold loan insurance.

That overshadowed an otherwise stronger performance - as its third quarter underlying profit was 83% higher than last year.

The government began selling off some of its shares in Lloyd's in September and it's expected to sell more next year.

It, like many European lenders, is seeing signs of recovery but it's clear the recent industry scandals are still taking their toll.

 

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