Deutsche Bank 2Q Profit Falls Sharply
07/31/2012| 02:16am US/Eastern
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FRANKFURT--Deutsche Bank AG (>> Deutsche Bank AG) Tuesday sought to reassure investors that it has sufficient capital, despite confirming a sharp drop in net profit and saying that the debt crisis is still pressuring client activity, in the first full set of figures presented by its newly appointed co-chief executives.
"The European sovereign-debt crisis continues to weigh on investor confidence and client activity across the bank. Our Core Tier 1 ratio was 10.2% at the end of the second quarter, well in excess of the 9% threshold set by the European Banking Authority for June 2012," Germany's largest bank by assets said.
Deutsche Bank said second-quarter net profit attributable to shareholders halved to EUR650 million ($798 million) from EUR1.2 billion a year earlier, hit by tumbling investment banking profits. The numbers confirmed approximate figures given ahead of schedule last week when it said key figures had fallen substantially short of analyst expectations.
The bank Tuesday fell short of giving a concrete outlook, but confirmed it will reach the target of a 7.2% Core Tier 1 ratio--a measure of how a bank can withstand crisis--under Basel 3 rules at the beginning of next year.
Deutsche Bank's weak investment banking results, meanwhile, echoed mixed second-quarter results from its peers. The bank said pretax profit in the unit fell by almost two-thirds to EUR357 million as revenue declined 11% and as the weakening euro led to higher costs in its U.K. and U.S. operations.
While all investment banks have suffered from sovereign-debt woes and sluggish client activity in second-quarter sales and trading as well as in their underwriting and advisory business, Barclays PLC (>> Barclays PLC) and Credit Suisse (>> Credit Suisse Group AG) managed to compensate for those hits with strong fixed-income, currency and commodities operations.
Deutsche Bank, known as a fixed-income powerhouse, posted a more than 40% decline in its FICC business, however. In the U.S., Goldman Sachs (>> Goldman Sachs Group, Inc.) positively surprised with a 37% increase of its FICC revenue, compensating a 17% revenue drop from financial advisory and underwriting activities. Investment banking fees at JP Morgan (>> JPMorgan Chase & Co.) and Morgan Stanley (>> Morgan Stanley) fell substantially.
Deutsche Bank co-CEOs Anshu Jain and Juergen Fitschen are set to outline key elements of the bank's new strategy in an analyst call scheduled for 1200 GMT. It will provide the first insight into the future shape of Germany's largest bank. They are expected to renew their commitment to a universal banking model with a global investment banking and a strong retail, asset and wealth management operations.
Pretax profit at the bank's asset and wealth-management unit posted a 85% decline following higher costs related to business taxes and legal expenses and as the failed sale of the unit hampered the business.
-Write to Eyk Henning at eyk.henning@dowjones.com
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