Deutsche Bank Profits Drop 76% in 4Q
Germany’s largest bank, Deutsche Bank AG (NYSE:DB), reported a sharp 76 percent drop in profits in its fourth quarter, due chiefly to asset write-downs and the European debt crisis, which slowed trading.
The bank posted a net income 147 million Euros, which compared very unfavorably with the expectation of 556 million Euros from 12 analysts polled by Bloomberg. The bank wrote down the value of its investments in sovereign Greek debt, Icelandic pharma maker Actavis Group hf, a Las Vegas casino and the BHF-Bank AG unit. It also set aside funds for litigation.
CEO Josef Ackermann steps down in May, handing charge to Co-CEOs Anshu Jain and Juergen Fitschen. According to Ackermann, 2012 is expected to be another challenging year. “The scale of the economic slowdown in Europe and around the world will largely depend on further progress in solving the sovereign debt crisis,” Ackermann said at the press conference.
In its debt trading operations, revenue dropped to 1.04 billion Euros from 1.61 billion Euros, while analysts had expected 1.47 billion Euros. The fall in equity trading revenues was worse, at 539 million Euros from 872 million Euros. At consumer banking, pre-tax earnings went up to 227 million Euros from 222 million Euros, very much off the analyst forecast of 384 million Euros. Though profits at the wealth and asset management businesses rose to 165 million Euros, analysts had expected better – 180 million Euros. Some parts of this operation are intended to be divested by the bank.
The bank needs to raise its Tier 1 capital adequacy by 3.2 billion but is “well capitalized and will be able to meet the stricter regulatory capital requirements before the relevant deadline,” Ackermann said. The bank will maintain its dividend unchanged from 2010 at 75 cents a share.
Here’s how shares are reacting to the news:
Deutsche Bank AG (NYSE:DB): DB shares recently traded at $44.52, down $0.09, or 0.2%.
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