Investment banking drags on Deutsche
DEUTSCHE Bank yesterday trod the same beaten path as its large US rivals as it revealed a jump in second quarter profits had been dampened by weakness in its investment bank.
Deutsche said pre-tax profits came in at €1.5bn (£1.25bn) for the three months to June, up 16 per cent on the €1.3bn it reported in the same period last year. The bank, like its peers, has seen provisions for credit losses ease substantially over the past year, putting aside just €243m in the second quarter compared to €1bn in the same three months of 2009.
However, chief executive Josef Ackermann admitted that the bank “followed the overall industry trends with weaker profitability in investment banking, which was driven by investor concerns and heightened volatility”. The corporate banking and securities division posted revenues of just €3.6bn over the quarter, 21.7 per cent lower than last year.
Deutsche also bowed to public pressure by revealing its level of sovereign debt exposure, after it came under attack for withholding the information following the European stress tests on Friday. The bank said it had net exposure of €1.1bn to Greece, €1bn to Spain and €8.1bn to Italy – more than double the exposure figures it released in May, calculated under its own risk models rather than the stress test methodology.
Arturo de Frias, an analyst at Evolution Securities, said: “The only one that would concern me is Greece, as we do expect a default at some point in the next couple of years. But it is a relatively small thing for Deutsche and disclosure brings confidence, so the figures won’t worry anyone too much.”
Despite the group’s investment banking woes, Ackermann was cautiously optimistic on
the prospects of a global recovery, claiming that “the current economic momentum is
likely to continue over the remainder of the year”