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.
Net profit for the quarter reached €1.1bn (£948m) compared to €645m in the equivalent quarter of 2008, thanks largely to a dramatic recovery in Deutsche’s corporate and investment bank (CIB) division.
The unit as a whole lost €27m in the second quarter of last year, but enjoyed a major turnaround to make a profit of just above €1bn for the three months to the end of June.
CIB revenue was up 84 per cent from last year to €5.3bn, accounting for around two thirds of total group revenue of €7.9bn, up 46 per cent on last year.
But the bank also set aside €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.
Chief executive Josef Ackermann put the profit increase in profits down to “stabilising markets and strong franchises in key products”.
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.
Deutsche, which is wrestling with accusations that senior executives approved espionage against the bank’s own staff, saw its shares fall 11.4 per cent to €46.09 on worries about the predicted increase in bad debts.