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Deutsche Bank became another investment-banking casualty during the second quarter, as it took a hit from lower sales and trading volumes. The German bank announced the results just one day after naming Juergen Fitschen and Anshu Jain as successors to Josef Ackermann as co-chairmen of the board.
Net profit for the quarter reached €1.2 billion ($1.7 billion), up marginally over the first quarter and flat year-on-year.
“In the current period, many flow businesses were adversely impacted by the continued uncertain macro environment, leading to lower volumes,” explained Deutsche while announcing the results.
Revenues in rates, money markets and foreign exchange were all lower than the same quarter last year, due to reduced flow volumes. Equity trading revenues were also down from the previous year’s quarter due to lower levels of client activity, particularly in Europe. Revenues in prime finance also fell, driven by lower levels of leverage and lower financing spreads, the German bank said. Deutsche stressed that the results were achieved while maintaining low levels of value at risk.
“Despite increasingly difficult market conditions, our business model has proven to be robust,” said Josef Ackermann, chairman of the management board, in a written statement. “Our efforts to recalibrate and rebalance our platform are paying off nicely.”
Indeed, it was the non-trading businesses that saved the day. Both wealth and asset management outperformed with wealth management reporting net inflows. The transaction bank delivered strong results “based on robust fee income and recovering interest rates”.
Deutsche’s results came a day after it decided to put an end to speculation about who would succeed Ackermann in the chairman’s seat — speculation that intensified after potential candidate Axel Weber accepted the top job at UBS.
Fitschen heads regional management worldwide and is also CEO of Germany, based in Frankfurt. Jain heads the corporate and investment bank, including corporate finance, sales and trading, and transaction banking. He divides his time between Germany and London.
The media had already speculated on co-chairmen as a solution: a German-speaking, native candidate as an effective foil for the Indian-born Anshu Jain. Failing to give Jain the top job was not an option as it exposed Deutsche to the risk that the man responsible for most of the money-spinning businesses might walk.
The German bank also suggested that Ackermann would be appointed chairman of Deutsche’s supervisory board, a move that drew mixed reactions from analysts. Some suggested that continuity at the top and the familiarity of having someone used to dealing with the establishment would work to Deutsche’s advantage, while others worried that such a structure could result in a bureaucratic tangle.
Fitschen’s contract is being extended by only three years as he is already 62, leading to a new round of speculation over whether this means Jain will have sole charge after three years. However, analysts who asked about the division of responsibilities between Fitschen and Jain were told that the decision has not yet been finalised.
