Deutsche Bank Q2 profits fall 49%

Continental Europe’s biggest bankset aside €600 million to cover legal costs

Deutsche Bank said second-quarter profit fell 49 per cent after it set aside about €600 million to cover legal costs. Photo: Bloomberg

Deutsche Bank said second-quarter profit fell 49 per cent after it set aside about €600 million to cover legal costs. Photo: Bloomberg

Tue, Jul 30, 2013, 07:30

Deutsche Bank, continental Europe’s biggest bank, said second-quarter profit fell 49 per cent after it set aside about €600 million to cover legal costs.

Net income in the three months through June dropped to €334 million from €656 million in the same period a year earlier, the Frankfurt-based bank said in a statement on its website today.

Deutsche Bank co-chief executive officer Anshu Jain is spending cash defending litigation and regulatory probes that stretch from the US housing market to allegations the company sought to rig interbank lending rates, or Libor.

The firm failed to benefit from the higher investment banking revenue that’s buoyed earnings at competitors in the US.

“Litigation is an issue for Deutsche Bank and other investment banks,” Andrew Stimpson, an analyst with Keefe, Bruyette and Woods in London who recommends investors buy Deutsche Bank shares, said in a phone interview yesterday. “They still face costs in investment banking.”

Deutsche Bank fell 0.4 per cent to €35.61 in Frankfurt yesterday.

Deutsche Bank increased its litigation reserves to €3 billion from €2.4 billion at the end of March, it said in the statement.

As well as being a subject of probes into manipulation of Libor, Deutsche Bank is a defendant in civil suits as an issuer or underwriter of US residential mortgage-backed securities.

In December, about 500 police and investigators raided its headquarters over tax evasion in carbon markets. It denies any wrongdoing.

A Milan judge convicted the bank and three other firms that month of fraud in the sale of derivatives to hedge the city’s interest-rate risk.

Jain riled some shareholders in April asking them to contribute to a €2.96 billion capital increase three months after saying it wouldn’t be in their interests.

Pretax profit at the investment bank climbed 58 per cent to €785 million.

Revenue rose 9 per cent to €3.71 billion. Debt trading income fell 11 per cent to €1.9 billion, while revenue from underwriting securities increased 67 per cent to 622 million euros.

In September, Deutsche Bank announced a plan to reduce annual expenses by €4.5 billion by 2015.

The firm said it will spend €4 billion to achieve those savings.

By the end of last year, Jain and his board completed the majority of almost 2,000 job cuts, including more than 800 at the investment-banking unit.

The company started moving 1,500 positions out of New York, London, Hong Kong and Singapore in the first quarter, chief operating officer Henry Ritchotte said in a presentation to investors in Brussels last month.

The bank hasn’t specified where the jobs are being moved to.

Deutsche Bank set aside €2.4 billion at the end of March to cover expenses from litigation and regulatory probes including the investigation into alleged manipulation of Libor, a global benchmark for interest rates.

Bloomberg