Deutsche hit by slowdown in trading

Frankfurt — Financial Times

The headquarters of Deutsche Bank is pictured in Frankfurt December 8, 2011. (© Ralph Orlowski / Reuters/REUTERS)



Deutsche Bank AG’s net income fell by a third in the first quarter after Europe’s largest bank by assets suffered a slowdown in trading and lower profits from its increasingly important retail banking operations.

Litigation charges and costs related to this week’s announced sale of Activis, the pharmaceuticals company, also pushed the German bank’s profits below analysts’ consensus estimates. Activity remained subdued in April, Deutsche said, reflecting the return of investor nervousness over the eurozone debt crisis.

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In the last quarterly results that will be announced under Josef Ackermann, chief executive, Deutsche’s net income fell from €2.1-billion ($2.8-billion U.S.) a year ago to €1.4-billion. Revenues fell 12 per cent to €9.2-billion compared with the same quarter a year ago.

“Financial markets remain cautious as we have seen in April, with investor risk appetite markedly lower,” Mr. Ackermann said. Stefan Krause, chief financial officer, said: “We do see lower activity level as we started into the second quarter. The environment has changed into more uncertainty.”

Deutsche’s shares fell more than 5 per cent to €32.38 in morning Frankfurt trading.

Revenues from fixed income sales and trading, the bank’s engine room, fell 8 per cent year on year to €3.4-billion. But the more pronounced slowdown was in equity sales and trading, where revenues fell 23 per cent.

The corporate and investment bank - headed by Anshu Jain, who will take over from Mr Ackermann in June as one of two co-chief executives - produced two-thirds of the group’s pre-tax profits. The division includes Deutsche’s transaction banking unit, where revenues rose 13 per cent to €967-million on the back of better fee and interest income.

Pre-tax profits from retail banking fell from €788-million to €413-million, although profits last year were flattered by a one-off gain on Deutsche’s stake in China’s Hua Xia bank. Revenues at Deutsche’s asset and wealth management operations fell 12 per cent. The businesses are being restructured and are expected to be one of the main areas where Mr. Jain will focus after the leadership handover.

Deutsche took litigation charges of €213-million as well as a charge of €257-million to sell Actavis, which it took over after having funded the buy-out of the generic drugs maker in 2007.

The bank’s core tier 1 capital ratio - a regulatory measure of the strength of its balance sheet - improved to 10 per cent from 9.5 per cent at the end of the year, with Deutsche saying it was on track to meet regulatory requirements ahead of their scheduled introduction in 2013.

Some analysts expect Deutsche, which has €2.1-trillion of assets, to need to raise capital but the bank has said it is not considering doing so.

Quarterly earnings per share fell from €2.13 to €1.44.

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