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Deutsche’s profits point to recovery
28.07.09
Deutsche Bank, one of the biggest employers in the City of London with more than 8000 UK workers, today strongly signalled the strength of recovery in investment banking in the capital.
As the credit crunch unwinds from banks to the wider economy, Deutsche's investment bank produced sparkling profits of €828 million (£715 million) in the last three months against a loss of €328 million between April and June 2008 when the meltdown was at its peak.
The recovery will come as good news not just for Deutsche's joint heads of investment banking, Anshu Jain and Michael Cohrs, but for rival London bankers at Barclays, Royal Bank of Scotland and HSBC, who are all expected to report huge profit rises from their investment banks next week.
London-based Jain's global markets division saw a massive improvement with revenues leaping by €2 billion year-on-year to €2.6 billion, as it was able to slash the amount it wrote off on toxic debts and enjoyed booming trade, particularly in the interest rate and foreign exchange markets.
Deutsche has also benefited from its role as adviser to the UK Government on financial stability and a growing upturn in work for corporate clients. It acts as adviser to more than 50 blue chip companies and recently handled Rio Tinto's record-breaking $15.2 billion (£9.1 billion) fund raiser.
But, as many of the UK banks will also reflect next week, Deutsche is seeing rising bad debts on its retail and business banking books. Provisions for such bad debts increased from €135 million a year ago to €526 million in the first quarter of this year, then almost doubling to €1 billion during the second quarter.
Net profits for the whole bank rose 68% to €1.09 billion, beating most analysts' forecasts.
Chairman Josef Ackermann, who saw Deutsche through the banking crisis without resorting to any government aid, said: “We have witnessed stabilisation of the world's banking industry and financial markets, thanks in part to resolute action by politicians, regulators and central bankers ,and these have benfited us.
“Increased liquidity and lower volatility in financial markets are both supportive for our business. However, we remain cautious on the outlook for the global economy,” Ackermann added.
Reader views (5)
Richard, I agree that some bankers/traders have been selfish and reward structures have been set inappropriately (and excessively)so that some have been encouraged to take stupid risks for immediate bonus rewards. On a grand scale that has played an important part in the credit boom/bubble over the last 15-20 years. But it's a mistake simply to dismiss people/banks who 'make money out of money'- that's credit creation or the basis of every economy. While it's tempting to favour more tangible industries making products you value, the fact is most of them couldn't function if banks extended no credit. The current mess proves that clearly...it's really not a delusion if you understand basic economics.
- David, London
Ashgl, UK London
We do indeed need a real economy in which those who are honestly productive are rewarded not cynical parasites who simply make money out of money - look where thst delusion got us.
- Richard Kennard, Welling
Richard - you must be an expert. Let's close the investment banks down, what does it matter how possible it is for businesses to raise funds to grow. Let's revert to Dark Ages finance when you knew your limits by how many coins you have in your strongbox. And derivatives - yes, they're a liability if you don't understand them and there are systemic market risks - but discard them altogether? You'd create an immediate cash crisis for the entire economy as, for example, oil companies and food manufacturers would not be able to sensibly manage their costs. In short, they become exposed to the price of the moment, can't plan and with no plan won't get any lending.
But I'm sure you must have a point if you know words like pernicious. It's just your view is SO derivative that it just sounds like another ill-informed rant instead of a solution. Try again?
- David, London
richard kennard
the time for cynicism is over.
we need a strong financial sector for recovery
of the 'real' economy.
- Ashgl, UK London
When an investnment banking parasite like Deutsche reports that it's making money one wonders how. Are they still trading the pernicious derivative products that led to the recent financial crisis or have their traders invented new ones, even more devious and abstruse, that will earn them obscene bonuses but lead to disaster once again at the taxpayers' expense?
- Richard Kennard, Welling
