Bloomberg News

Deutsche Bank Abandons Profit Goal, Unveils 500 Job Cuts

October 04, 2011

(Updates with Ackermann comments from sixth paragraph.)

Oct. 4 (Bloomberg) -- Deutsche Bank AG scrapped its profit forecast and announced 500 job cuts and further writedowns of Greek bond holdings amid a “significant and unabated slowdown in client activity” in the wake of Europe’s debt crisis.

The bank also said “costs relating to an indirect tax position” weighed on third-quarter results. Deutsche Bank, which had targeted 10 billion euros ($13.2 billion) in operating pretax earnings this year, still expects a profit for the quarter ended Sept. 30 and “robust” earnings for the full year, according to a statement today.

Deutsche Bank joins competitors UBS AG and Barclays Plc in cutting investment-banking jobs to help weather a slowdown as Europe’s debt woes roil markets. Greece’s fiscal crisis has spread to other countries in the region and reduced earnings and constrained funding for banks including Dexia SA, which received pledges of support from France and Belgium today.

“Market conditions simply didn’t allow them to reach the target,” said Konrad Becker, a Munich-based analyst at Merck Finck & Co. “If market conditions deteriorate further, more reductions could follow.”

Deutsche Bank shares slid as much as 9.1 percent, the most since July 2009. The stock was down 7.4 percent to 23.85 euros at 4 p.m. in Frankfurt, where the bank is based.

“We have a strong and diverse client focus franchise, but it’s relatively exposed to a slowdown in Europe,” Chief Executive Officer Josef Ackermann said today at a conference in London. “Europe was, of course, not particularly successful in the last few months.”

Greece, Tax Expense

About 42 percent of revenue from the bank’s sales and trading operations came from Europe last year, Ackermann said.

The bank will write down its Greek sovereign-debt holdings by about 250 million euros for the third quarter after a 155- million-euro value reduction at the end of the second quarter, according to the statement. That reduces Deutsche Bank’s net risks related to Greek sovereign debt to about 900 million euros, Ackermann said.

Company spokesman Armin Niedermeier declined to elaborate on the so-called indirect tax position. Deutsche Bank is scheduled to publish third-quarter earnings on Oct. 25 and the lender will detail the item on that date, he said.

Job Cuts

Deutsche Bank will cut about 500 jobs at its corporate banking and securities unit in the fourth quarter and the first three months of next year, mostly outside Germany. Headcount will be 11 percent lower in 2012 than in 2010, Ackermann said at the conference, broadcast via the company’s website.

Stefan Krause, Deutsche Bank’s chief financial officer, told reporters in Frankfurt last month that the company was “fighting” for its profit goal.

The lender today predicted the “best pretax profit ever” for its so-called classic banking business with private clients, asset management and global transaction banking.

Ackermann, 63, is set to replace Clemens Boersig as chairman of Deutsche Bank’s supervisory board next year, when Anshu Jain, the head of investment banking, and Juergen Fitschen, who steers the Frankfurt-based lender’s domestic business, move up to share the CEO role.

Deutsche Bank’s shares have dropped 65 percent since May 23, 2002, when Ackermann became CEO. That’s less than the 67 percent decline in the same period for the 49-company Stoxx 600 Banks Index, and the 89 percent slump by Commerzbank AG, the second-largest German bank.

--With assistance from Rajiv Sekhri in Frankfurt, Oliver Suess and Mariajose Vera in Munich and Niklas Magnusson in Hamburg. Editors: Keith Campbell, Dylan Griffiths.

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Oliver Suess in Munich at osuess@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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