Chillin' out till it needs to be funded
Even as IIF Chairman and the Bank’s CEO Josef Ackerman finished his final term as Spokesman for the Board, he left behind a bank in anguish as it put behind two good years of 2009 and 2010 and dwelt into a muggy European loss in 2011. The bank posted pretax losses for Q4 and ended 2011 with a EUR 4.3 bln or $5.6 bln net income. The Q4 profit of EUR 147 mln was 76% lower than last December’s EUR 600 mln, in itself a low score for the bank, proposing a EUR 10 bln IBIT target for the year
The bank entered 2011 with momentum from cross hiring laid staff in trading rooms globally and a fresh commitment to US trading business before capital shortfalls and new regulations on wholesale funding strait jacketed it and continuous draining from PIIGS exposure and/or non existent Corporate and Institutional Banking business spelt a big hole for the bank management even as a mid year leadership change affirmed trading afficionado Anshu Jain into the Co CEO role
Deutsche Bank took charges related to litigation, Greek government bonds, Icelandic generic drug maker Actavis Group hf, a Las Vegas casino and its BHF-Bank AG unit, moves that smooth the way for the new management team.
The bank’s revenues ended at EUR 33.7 bln or $43.8 bln in Josef Ackerman’s valedictory appearance as the change of profit goals in the crisis was followed by charge offs for Metropolitan Casino investment in Vegas, and revenue increases of 16% over last year were attributed to Postbank and Sal Oppenheim acquisitions. Postbank added EUR 1 bln in revenues from Q2 onwards. Q3 also produced a surprise profit tied into the Postbank bump The three revenue acquisitions including ABN AMRO business in the Netherlands accounted for the entire EUR 2.9 bln in increase in Non interest expenses for the year to EUR 26 bln and hold hope for 2012 where headcount reductions will help to cut any increasing expense heads.
CIB revenues hardly moved throughout 2011 from EUR 2.9 bln in Q2 when the Euro was at 1.40 to EUR 3.5 bln in Q3 when cracks in the Eurozone appeared to become an insistent noise. The CIB team’s EUR 3.4 bln revenues turned out a EUR 422 mln pre tax loss in the investment bank itself, completing the wipe out of its Q1 profit in the division.
The bank’s run out of time to absorb the capital shocks it put away for 3 years as the European sovereigns never came back and it has become increasingly disastrous for global investment banks to keep on extra trading staff. The bank has planned to lose 500 roles by March and its Australia M&A head Angus Barker just left the bank.
The investment Bank which Jain heads produced only EUR 1.58 bln in revenues and was expected to turn in a small profit but churned out a loss even as 2012 looks better yet sparse. While Equity trading was lower globally, capital considerations probably forced the banks hand in producing only EUR 1 bln in Debt trading revenues. Q1 2011 had produced $10 bln in CIB revenue alone. A tail event in Europe is still the biggest concern for the Top 10 global banks and Deutsche bank is clearly a survivor, getting out of a peculiar German environment into most geographies even as a fresh attack into US business needs to be undertaken when waters are calmer.
Meanwhile “Classic” banking reflected 56% of the profits for the year even as Q4 looked tough for PCAM incl Postbank at EUR 4.2 bln in revenues and less than EUR 100 mln in profits after the EUR 135 mln in Postbank’s greek holdings. the PBC incl Consumer and Advisory Bank ( Postbank) posted EUR 2.6 bln in revenues up EUR 892 mln on Postbank and Asset management reported EUR 909 mln in the fourth quarter as the bank exits funds management businesses in the US incl the Scudder investments units
Full year PCAM revenues were EUR 14.5 bln, of which AWM (Asset and Wealth management ) stagnated at EUR 3.8 bln
Another EUR 144 mln on top of last quarter’s EUR 185 mln was booked loss on Greek bonds taking it closer to the traded 90% levels currently. The bank is fully Basel 2.5 compliant ahead of roll call at 9.5% capital
Transaction Banking also grew handsomely to EUR 3.6 bln in revenues for the full year after reducing a 226 mln charge in the Netherlands incl Custody (Securities Services) , Trade Finance and Cash management benefitting from higher interest rates in Asia and Europe. The IBIT in Transaction banking recovred 144% in the last quarter taking it to 1.1 bln for the whole year