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Bad debt fear hits Deutsche despite profit

DEUTSCHE Bank posted a 67 per cent rise in second-quarter profits yesterday as it was boosted by a barnstorming performance from its investment banking operations, but saw its shares fall on fears of mounting bad loans.<br /><br />Net profit for the quarter reached &euro;1.1bn (&pound;948m) compared to &euro;645m in the equivalent quarter of 2008, thanks largely to a dramatic recovery in Deutsche&rsquo;s corporate and investment bank (CIB) division.<br /><br />The unit as a whole lost &euro;27m in the second quarter of last year, but enjoyed a major turnaround to make a profit of just above &euro;1bn for the three months to the end of June.<br /><br />CIB revenue was up 84 per cent from last year to &euro;5.3bn, accounting for around two thirds of total group revenue of &euro;7.9bn, up 46 per cent on last year.<br /><br />But the bank also set aside &euro;1bn in provisions against bad loans, amid fears that the flow of debt defaults will be more rapid in the second half of 2009 and beyond.<br /><br />Chief executive Josef Ackermann put the profit increase in profits down to &ldquo;stabilising markets and strong franchises in key products&rdquo;.<br /><br />Ackermann said the global economy had begun to stabilise, but warned that unemployment and plunging property markets would continue to put pressure on credit conditions.<br /><br />Deutsche, which is wrestling with accusations that senior executives approved espionage against the bank&rsquo;s own staff, saw its shares fall 11.4 per cent to &euro;46.09 on worries about the predicted increase in bad debts.