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Last updated: April 26, 2012 5:42 pm
Deutsche Bank’s net income fell by a third in the first quarter after Europe’s largest bank by assets was hit by a tougher trading environment and lower profits from its increasingly important retail banking operations.
Litigation charges and costs related to this week’s announced sale of Actavis, 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.
In the last quarterly results that will be announced under Josef Ackermann, chief executive, Deutsche’s net income fell from €2.1bn a year ago to €1.4bn. Revenues fell 12 per cent to €9.2bn compared with the same quarter last year.
“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.”
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 €967m on the back of better fee and interest income.
Revenues from fixed-income sales and trading, the bank’s engine room, fell 8 per cent year on year to €3.4bn, although revenues rose in some businesses such as foreign exchange trading. A more pronounced slowdown was in equity sales and trading, where revenues dropped 23 per cent.
Some analysts said investment bank revenues were better than expected and Deutsche said it was deliberately taking fewer risks.
Pre-tax profits from retail banking fell from €788m to €413m, although profits last year were flattered by a one-off gain on Deutsche’s stake in China’s Huaxia 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 €213m as well as a charge of €257m to sell Actavis, which it took over after having funded the buyout of the generic drugs maker in 2007.
The bank’s core tier one 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 €2.1tn of assets, to need to raise capital but the bank has said it is not considering doing so.
Quarterly earnings a share declined from €2.13 to €1.44. Deutsche’s shares fell more than 3.4 per cent to €32.95.
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