Deutsche’s profits point to recovery
Deutsche Bank, one of the biggest employers in the City of London with more than 8000 UK workers, today strongly signalled the strength of recovery in investment banking in the capital.
As the credit crunch unwinds from banks to the wider economy, Deutsche's investment bank produced sparkling profits of 828 million (£715 million) in the last three months against a loss of 328 million between April and June 2008 when the meltdown was at its peak.
The recovery will come as good news not just for Deutsche's joint heads of investment banking, Anshu Jain and Michael Cohrs, but for rival London bankers at Barclays, Royal Bank of Scotland and HSBC, who are all expected to report huge profit rises from their investment banks next week.
London-based Jain's global markets division saw a massive improvement with revenues leaping by 2 billion year-on-year to 2.6 billion, as it was able to slash the amount it wrote off on toxic debts and enjoyed booming trade, particularly in the interest rate and foreign exchange markets.
Deutsche has also benefited from its role as adviser to the UK Government on financial stability and a growing upturn in work for corporate clients. It acts as adviser to more than 50 blue chip companies and recently handled Rio Tinto's record-breaking $15.2 billion (£9.1 billion) fund raiser.
But, as many of the UK banks will also reflect next week, Deutsche is seeing rising bad debts on its retail and business banking books. Provisions for such bad debts increased from 135 million a year ago to 526 million in the first quarter of this year, then almost doubling to 1 billion during the second quarter.
Net profits for the whole bank rose 68% to 1.09 billion, beating most analysts' forecasts.
Chairman Josef Ackermann, who saw Deutsche through the banking crisis without resorting to any government aid, said: "We have witnessed stabilisation of the world's banking industry and financial markets, thanks in part to resolute action by politicians, regulators and central bankers ,and these have benfited us.
"Increased liquidity and lower volatility in financial markets are both supportive for our business. However, we remain cautious on the outlook for the global economy," Ackermann added.
