Deutsche Bank AG (DB) Tuesday reported that its second-quarter profit nearly halved, as operating expenses increased and revenues declined, in a more difficult market environment, even as provision for credit losses declined. The German bank's earnings from Asset and Wealth Management segment plunged 85 percent and from Corporate Banking and Securities fell 63 percent.
Jürgen Fitschen and Anshu Jain, Co-Chairmen of the Management Board and the Group Executive Committee, stated, "In the second quarter, the Bank's performance was impacted by a volatile environment. The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank."
In contrast, Swiss banking giant Credit Suisse Group (CS) in mid July reported higher profit in its second quarter, benefited by lower expenses, even as revenues at private banking and asset management segments were hurt amid adverse market conditions.
Deutsche Bank's net income for the second quarter plunged to 661 million euros ($811.20 million) from 1.2 billion euros in the year-ago quarter. Earnings per share fell to 0.68 euros from 1.24 euros in the prior-year quarter.
In the quarter, expenses increased on effects from foreign exchange rate movements as well as higher litigation-related expenses and operational losses, IT costs and professional service fees.
Net revenues dropped 6 percent to 8 billion euros, despite benefit from foreign exchange rate movements.
Segment-wise, revenues in Corporate Banking and Securities fell 11 percent mainly as Sales & Trading unit performed badly due to deliberately lower levels of risk taking to correspond with reduced business volume. Origination (equity) division was hurt by the current market conditions as well as the absence of prior-year's strong IPO activity.
Global Transaction Banking segment's revenues grew 10 percent on strong fee and interest income, reflecting growing client volumes and balances in a continuously low interest rate environment. While interest rates in the U.S. remained at historically low levels, interest rates in Europe decreased further.
In Private & Business Clients segment, strong credit and deposit volumes were more than offset by lower revenues from reduced investment portfolio of Postbank and an ongoing low interest rate environment.
In Asset and Wealth Management segment, revenues declined 9 percent, partly impacted by low asset flows in Asset Management, resulting from negative market impacts, despite strong Private Wealth Management inflows.
Provision for credit losses was 419 million euros, a decrease of 10 percent from last year, mainly attributable to lower provisions recorded at Postbank, slightly offset by higher provisions for credit losses recorded in Global Transaction Banking and Corporate Banking and Securities segments.
The bank's core tier 1 ratio was 10.2 percent at the end of the second quarter, well in excess of the 9 percent threshold set by the European Banking Authority for June 2012. The capital ratio was also higher than the 10 percent at the end of the first quarter 2012.
Deutsche Bank shares closed Monday's trading at 24.95 euros, up 0.60 euros or 2.44 percent.
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