Deutsche Bank warns of lower investment bank revenue
FRANKFURT (Reuters) - Deutsche Bank warned that investment banking revenue would be significantly lower in the third quarter and it will set aside more money to deal with litigation.
"We currently anticipate debt sales and trading revenues in the third quarter to decline significantly from last year," said
Co-Chief Executive Anshu Jain, speaking at an investor conference in London on Wednesday.
Deutsche Bank shares fell 3 percent by 1432 GMT, underperforming the sector index <.SX7P> which was 0.7 percent lower.
Jain blamed the lack of market activity for the weaker revenues. Last year trading had received a boost from stimulus measures by the European Central Bank, which made a pledge to do "whatever it takes" to safeguard the euro, a statement that led markets to rebound.
The current slowdown in bond market trading has been blamed on expectations that the U.S. Federal Reserve would begin to unwind some of the extraordinary stimulus measures such as a bond buying programme.
JP Morgan analysts forecast that Deutsche Bank's third-quarter revenue from fixed income, currencies and commodities (FICC) could fall 31 percent on the year to 1.6 billion euros ($2.2 billion).
Barclays said last week income in July and August was down 500 million pounds ($802 million) from a year ago, mainly due to weakness in its FICC division.
Deutsche Bank and Barclays are Europe's top fixed income firms and each gets about 55 percent of its investment bank revenue from FICC.
Deutsche Bank's efforts to shed around 250 billion euros in assets had not impacted investment banking revenues, Jain said. Deutsche had no plans to sell individual businesses as part of its effort to cut down its balance sheet, he added.
Jain said the equity sales and trading division continued to perform well in the third quarter and that the divisions of private and business clients, global transaction banking and asset and wealth management are performing in line with expectations.
On litigation Jain said: "We anticipate taking additional litigation reserves."
He added that there were "no new themes", but that Deutsche had watched other banks reach settlements with regulators leading the Frankfurt-based lender to "draw inferences."
In its second quarter earnings report, Deutsche Bank said litigation provisions were 630 million euros. For litigation issues which were remote but may still have a significant impact on the group, it had earmarked a further 1.2 billion euros.
Unlike rivals Barclays and UBS , Deutsche Bank has not yet reached a settlement over allegations it was involved in a scam to manipulate global benchmark inter-bank lending rates.
Separately, Commerzbank CEO Martin Blessing said at the same conference that the lender's 2013 outlook remained unchanged and that due to an ongoing asset reduction programme and low interest rates revenues were expected to remain under pressure and provisions for bad loans were expected to rise.
Shares in Commerzbank lost 6.9 percent by 1436 GMT as investors fretted over the lender's slow progress in reducing its 347 billion euros book of non-core assets.
(Reporting by Edward Taylor and Arno Schuetze; Editing by Thomas Atkins and David Holmes)
