Alex Domanski/ReutersThe headquarters of Germany’s Deutsche Bank in Frankfurt.
Amid a slump in trading revenue, Deutsche Bank reported disappointing profit, weak results that might help validate the decision to split leadership between the head of the investment bank and the head of the German unit.
The bank, the largest in Germany, earned more in the second quarter from noninvestment banking businesses like retail banking, helping lift net profit 6 percent from the same period last year, to 1.2 billion euros, or $1.7 billion. Still, the earnings fell short of analysts’ estimates.
On Monday, Deutsche Bank resolved a leadership crisis by saying that Anshu Jain, head of the investment bank, and Jürgen Fitschen, head of the German unit, would share chief executive duties starting next year. While the bank generally earns most of its profit from investment banking, it has been trying to build up less risky business like lending to consumers.
“While the earnings environment remains tough for investment banks, Deutsche Bank has fared better than European peers and arguably faces lower short-term earnings risk,” Jon Peace, banking analyst at Nomura International, said in a research note on Monday.
Deutsche Bank, the largest bank in Germany, said pretax profit in the corporate and investment bank was flat, at 1.3 billion euros, while pretax profit from private clients and asset management more than doubled, to 684 million euros.
The bank took a 132 million euro charge to reflect the decline in value of its Greek bonds, and said that trading revenue was hurt by the uncertainty created by the sovereign debt crisis in Europe.
“Our efforts to recalibrate and rebalance our platform are paying off nicely,” the current chief executive, Josef Ackermann, said in a statement.
Under a compromise to resolve a leadership struggle that had begun to damage the bank’s image, Mr. Ackermann, 63, who has been chief executive since 2002, will become chairman of the supervisory board, Deutsche Bank said on Monday. Shareholders will need to approve the appointment at the annual meeting in May, after which the changes will take effect.
ReutersDeutsche Bank named Anshu Jain, left, and Jürgen Fitschen as future co-chiefs.
Investors had favored Mr. Jain, whose unit supplies by far the greatest share of profit, as chief executive. But Mr. Jain, a native of India who is not fluent in German, was regarded as not ready to assume the statesmanlike duties expected of the head of an institution that holds a prominent place in the nation’s identity.
Mr. Fitschen, 62, is expected to help overcome reservations by Deutsche Bank staff members about Mr. Jain, 48. He and Mr. Ackermann are also expected to ensure that the bank continues to develop businesses less volatile than investment banking.
Mr. Jain will receive a contract until 2017, while Mr. Fitschen’s contract will run until 2015, Deutsche Bank said. That suggests Mr. Fitschen is likely to serve as a transitional figure while Mr. Jain learns more about Deutsche Bank’s other businesses, at which point he could become sole chief executive.
As part of the plan, Clemens Börsig, current chairman of the supervisory board, will step down from the part-time position.
This post has been revised to reflect the following correction:
Correction: July 26, 2011
An earlier version of the story indicated quarterly profit was flat. Profit rose modestly but disappointed for the period.
Article source: http://dealbook.nytimes.com/2011/07/26/its-leaders-chosen-deutsche-reports-flat-profit/?partner=rss&emc=rss
