FRANKFURT â€" Deutsche Bank, Europe’s largest investment bank, said on Tuesday that net profit fell by half in the second quarter of the year as it earned fewer fees from financial market trading and faced a higher tax bill as well costs related to lawsuits.
The results showed that, like many of its peers, Deutsche Bank is still coping with the aftermath of the financial crisis as well as turmoil on securities markets, which have caused its clients to do less trading, cutting into fees.
“The current quarter performance was significantly impacted by an uncertain macroeconomic backdrop which resulted in elevated market volatility and a broad sell-off across asset classes towards the end of the quarter,†Deutsche Bank said in a statement.
Net profit fell to 335 million euros, or about $444 million, from 666 million in the second quarter of 2012, Deutsche Bank said. Revenue rose 2 percent during the quarter to 8.2 billion euros - $10.87 billion â€" but the gain was offset by additional expenses, including 630 million euros related to the cost of legal proceedings.
The bank faces numerous lawsuits, including some from aggrieved investors who bought investments related to the U.S. real estate market prior to the subprime crisis in 2008.
Deutsche Bank said it increased its capital during the quarter, and that it would shrink the size of its financial holdings in order to answer criticism that it is too dependent on borrowed money.
According to press reports last week, Deutsche Bank was planning to cut its total assets by 20 percent, but the bank gave no target figure Tuesday in releasing its earnings report ahead of a conference call by bank executives.
Deutsche Bank said it increased its so-called Core Tier One capital ratio, a measure of the bank’s ability to absorb losses, to 10 percent at the end of June from 8.8 percent at the end of March based on the latest regulatory standards.
The bank said its leverage ratio, the proportion of its own cash or shares to borrowed money, was 3 percent. Many economists consider the leverage ratio to be a better measure of a bank’s resiliency than the capital ratio; regulators in the United States are in the process of raising the required leverage ratio for the largest banks to 6 percent.
“We are committed to further reducing the balance sheet in a manner that enables us to meet requirements on leverage ratio, sustain our value proposition to clients and strengthen our business model without materially impacting financial performance,†Anshu Jain and Jürgen Fitschen, co-chief executives of the bank, said in a statement.
