Deutsche Bank blames euro for weak second quarter
FRANKFURT (Reuters) - Deutsche Bank AG (DBKGn.DE) became the latest global investment bank to post weak second quarter pretax profit, as the flagging euro and lower trading activity hit earnings.
Preliminary figures released on Tuesday ahead of Germany's biggest bank's July 31 reporting date showed the bank expects second-quarter pretax profit of about 1 billion euros ($1.2 billion), down from 1.8 billion a year earlier and below market expectations.
Deutsche blamed the weak euro for inflating its dollar and sterling cost base, shrinking its second-quarter net income to about 700 million euros from the 1.2 billion a year before.
Analysts had forecast a pretax profit of 1.4 billion euros and net income of 1 billion, according to ThomsonReuters Starmine.
Philipp Haessler, banking analyst at Equinet, said: "The figures are weaker than expected, mainly due to costs and risk provisions."
Costs were 300 million euros higher than expected, Metzler bank analyst Guido Hoymann said, adding the results did not appear to include any provisions for a potential settlement in the Libor rate-setting scandal.
The Libor affair has embroiled Britain's Barclays Plc (BARC.L) and threatens to spill over to other lenders.
An internal probe at Deutsche found that two of its former traders may have been involved in colluding to manipulate benchmark interest rates, but there was no indication of failure at the top of the organization, three people close to the investigation said.
Deutsche said its credit provisions for bad loans were approximately 400 million euros.
Big investment banks have seen investment income plunge in the second quarter, as highlighted by results from Morgan Stanley (MS.N) and Credit Suisse (CSGN.VX).
Earlier this month it emerged that Deutsche Bank may cut almost a tenth of its investment banking staff due to weak trading activity since the beginning of the year.
Deutsche said its core Tier One capital ratio was 10.2 percent at the end of June, adding it would still achieve a ratio of 7.2 percent by year-end using stricter standards for measuring the quality of capital.
The bank also said lower full-year net income projections would be mitigated by additional de-risking measures this year, without providing details.
Based on market consensus, Germany's flagship lender had assumed a net profit of about 4 billion euros for 2012 to calculate its full-year core capital assumptions.
Deutsche Bank's shares closed 0.2 percent down at 23.47 euros. The statement had appeared only 10 minutes before European stock markets closed.
(Editing by David Holmes)
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