July 24 (Bloomberg) -- Deutsche Bank AG, Germany’s biggest bank, said it will reduce risk to meet its 2013 capital ratio goal after second-quarter profit missed analysts’ estimates on expenses tied to a weaker euro.
Net income fell to about 700 million euros ($844 million) from 1.2 billion euros a year earlier, according to preliminary results the Frankfurt-based lender disclosed unexpectedly in a statement today. The result missed the 999 million-euro average estimate of six analysts surveyed by Bloomberg. Pretax profit slid to about 1 billion euros from 1.8 billion euros. That compares with an analysts’ estimate of 1.5 billion euros.
Investment banks are fighting to reduce costs with job cuts as a slump in trading by clients amid Europe’s debt crisis reduces revenues. Deutsche Bank said it will compensate for the profit shortfall announced today by stepping up “de-risking measures” to fulfill stricter capital requirements.
“The sovereign debt crisis is affecting the economy as a whole and Deutsche Bank’s earnings reflect that,” said Andrew Stimpson, a banking analyst at Keefe, Bruyette & Woods Ltd. in London. “The costs were higher than I had expected, apparently because of a weaker euro, and that’s a trend that is continuing in the third quarter.”
Deutsche Bank’s shares have plunged 20 percent this year, more than the 8.7 percent decline for the Bloomberg Europe Banks and Financial Services Index, which tracks 38 stocks. The stock closed down 0.2 percent at 23.47 euros in Frankfurt today.
The euro’s decline against the U.S. dollar and British pound increased costs in those regions relative to Deutsche Bank’s home base as Europe’s debt crisis weighed on the common currency in the second quarter. The euro fell 5.1 percent relative to the dollar during the second quarter.
Non-interest expenses probably rose to 6.6 billion euros from 6.3 billion euros as net revenue fell to about 8 billion euros from 8.5 billion euros, according to the statement. The earnings are the first under Deutsche Bank’s new dual leadership of Anshu Jain, 49, and Juergen Fitschen, 63, who took over from Chief Executive Officer Josef Ackermann, 64, at the end of May.
The company will publish full second-quarter earnings on July 31, as scheduled.
The bank cut about 500 investment bank jobs after scrapping its operating pretax profit forecast of 10 billion euros for 2011 in October amid what it then called a “significant and unabated slowdown in client activity.”
Deutsche Bank is considering cutting about 1,000 positions at the unit as revenue declines, a person familiar with the matter said July 19.