Deutsche Bank profits eroded by investment downturn | Business| Economy and finance news from a German perspective | DW | 31.07.2012
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Deutsche Bank profits eroded by investment downturn

Volatile markets and investor reluctance have weighed heavily on Deutsche Bank's second quarter income, slashing profits nearly in half. The result is a blow to the bank's new leadership duo.

Germany's biggest bank saw its profit slashed by 46 percent to 661 million euros ($811 million) in the second quarter, compared with a net income of 1.2 billion euros in the same quarter a year ago.

The result had come on the back of falling revenues, which fell 6.0 percent to 8.0 billion euros, the bank said Tuesday.

ARCHIV - Die Kombo zeigt Anshu Jain (l) , Vorstandsmitglied der Deutschen Bank (Foto vom 26.05.2009) und Jürgen Fitschen, Head of Global Markets und Mitglied des Deutsche Bank Group Executive Committee (Foto vom 05.02.2009).Ob Wirtschaft, Politik, Kultur oder Sport: Doppelspitzen sind beliebt - und gehasst zugleich. Foto: Arne Dedert dpa/lhe (zu lhe-Korr Beste Wahl oder Notlösung? Erfahrungen mit der Doppelspitze vom 22.07.2011) +++(c) dpa - Bildfunk+++

New bank leadership - Anshu Jain and Jürgen Fitschen

Deutsche Bank's co-Chief Executives Jürgen Fitschen and Anshu Jain said in a statement that the bank's performance was impacted by the sovereign debt crisis in Europe, which was weighing on "investor confidence and client activity."

Investment division nosedives

Hardest hit was Deutsche Bank's investment banking division, of which pre-tax profit nosedived 63 percent to 357 million euros. The bank said that this was partly a result of "deliberately lower levels of risk" being taken due to subdued trading volumes.

However, Deutsche Bank's retailing operations also posted a profit drop, declining to 398 million euros, down 13 percent.

The weak result raised questions among market analysts whether or not Deutsche Bank will be able to meet new EU capital requirements coming into force later this year.

However, the bank insisted that its core capital ratio, which is an important measurement of a bank's financial health, stood at 10.2 percent, and subsequently above the 9.0 percent required by EU regulators.

Leadership duo's first report

The earnings statement was the first reported by Jain and Fitschen who took over as CEOs from Josef Ackermann in May. They are expected to announce a major savings plan, which is said to include job cuts notably in the investment banking arm.

In addition, they will unveil major provisions to cope with likely penalties as a result of the Libor interest rate-fixing scandal.

Deutsche Bank is part of a group of major global banks, which face allegations of tweaking the London Inter-Bank Offered Rate (Libor) in their favor and to the detriment of their customers.

uhe/ipj (dap, AFP, AP)