DealBook: Deutsche Bank Blames Weak Euro for Drop in Second-Quarter Profit

ReutersDeutsche Bank’s co-chief executives are Anshu Jain, left, and Jürgen Fitschen.

FRANKFURT — Deutsche Bank, Germany’s largest lender, said on Tuesday that earnings plunged more than expected in the second quarter after a weak euro led to an increase in operating costs in the United States and Britain.

Profit fell more than 40 percent to 700 million euros, or $844 million, the bank said in a preliminary release that offered little detail. The bank’s operating expenses not counting interest rose 5 percent from a year earlier, to 6.6 billion euros.

The increase in costs “is mainly a result of the bank’s U.S. dollar and pound sterling cost base being negatively affected by the weakening of the euro,” the bank said. The euro was trading at slightly more than $1.20 Tuesday, near a two-year low.

The preliminary earnings report demonstrates the challenges facing Anshu Jain and Jürgen Fitschen, who took over in May as co-chief executives of the bank, replacing Josef Ackermann, who retired. Deutsche Bank shares fell 2.1 percent Tuesday to close at $28.17 in New York.

In past quarters, Deutsche Bank had lower trading revenue as its clients stayed away from financial markets hurt by the euro zone debt crisis. The bank said that revenue in the second quarter fell to 8 billion euros from 8.5 billion euros a year earlier.

Deutsche Bank is among the institutions under scrutiny by authorities in connection with manipulation of Libor, the London interbank offered rate, a benchmark used to help determine the borrowing rates for $750 trillion worth of financial products, including student loans and mortgages.

After a rival, Barclays, agreed in June to pay $450 million to resolve accusations against it by American and British authorities, there had been speculation that Deutsche Bank would set aside money to cover a possible settlement. But the bank did not mention the Libor investigation in its one-page statement Tuesday.

Nor did it address speculation that it planned large cuts in its investment banking unit, previously run by Mr. Jain. The bank said only that it planned to reduce its level of risk to help restore profit.

Deutsche Bank said it set aside 400 million euros in the quarter to cover possible bad loans, down from 464 million euros a year earlier. Profit before taxes was about 1 billion euros, down from 1.8 billion euros, the bank said.
It said it would provide precise figures and more details about the quarter on July 31.

Article source: http://dealbook.nytimes.com/2012/07/24/deutsche-bank-blames-weak-euro-for-drop-in-second-quarter-profit/?partner=rss&emc=rss