Debt turmoil hits Deutsche Bank's second-quarter results

Jul 26, 2011, 7:50 GMT

Frankfurt - Germany's biggest bank, Deutsche Bank reported Tuesday a modest increase of about 3 per cent in second-quarter profit as a pick up in its retail banking and asset management business helped to offset the turmoil triggered by the eurozone debt crisis.

The Frankfurt-based bank said net profit rose to 1.2 billion euros (1.74 billion dollars). The group's profit stood at 2.06 billion euros in the first quarter.

'Despite increasingly difficult market conditions, our business model has proven to be robust,' said chief executive Josef Ackermann, releasing the results. 'Our efforts to recalibrate and rebalance our platform are paying off nicely.'

Underscoring the impact on Europe's financial sector of the debt crisis gripping parts of the eurozone, Deutsche said that in the second quarter it booked 155 million euros in charges related to its holdings of Greek sovereign debt.

The German bank said its total exposure to debt in the nations at the centre of the financial crisis - Greece, Ireland, Italy, Portugal and Spain - stood at 3.7 billion euros at the end of June.

The release of the bank's latest earnings results followed its long-awaited announcement late Monday that it is to create a joint chief executive post after Ackermann steps down next year.

Deutsche said investment-banking head Anshu Jain and management board member Juergen Fitschen will take over from Ackermann as joint chief executive.

The 63-year Ackermann is to replace Clemens Boersig as chairman of the bank's supervisory board, Deutsche said.

The announcement that Jain, the 48-year-old Indian-born will run the bank with Fitschen, who runs Deutsche's German operations, ends months of speculation about who would emerge as the bank's new chief, which is one of the key posts in the European financial sector.

The long drawn-out process to find a replacement for Ackermann has also exposed tensions in Deutsche's upper management.

Despite the speculation about who might head up Deutsche, Jain has long been seen as the crown prince to take over the bank's chief executive chair. Educated in New Delhi and in the US, Jain is also a passionate cricket fan.

After joining Deutsche in 1995 Jain rose through Deutsche's ranks to finally head up its investment banking business, turning it into the bank's top money spinner and one of the world's leading investment banking operations. The London-based Jain does not speak German.

With his extensive network of contacts in Germany's political and economic establishment, Fitschen is seen by banking analysts as complementing Jain's skills.

But at age 62, Fitschen is also considered to be a temporary solution to the bank's search for a successor to Ackermann.

After a long career at Deutsche dating back to 1987, Fitschen is now close to retirement. This could leave Jain as the real power at Deutsche, analysts say.

Releasing its results, Deutsche confirmed its target for this year of 10 billion euros in operating pretax profit.

The bank said second-quarter revenue from its corporate and investment banking business edged up to 4.9 billion euros from 4.7 billion euros.

At the same time, revenue from it private and business-clients group jumped by 77 per cent from the same period last year to 2.6 billion euros following the integration of Deutsche Postbank AG, which is Germany's largest retail bank.

Revenue from asset and wealth management climbed by 9 per cent to 976 million euros, it said.

Net revenues rose 19 per cent to 8.5 billion euros, Deutsche said.