FRANKFURT, Germany (AP) -- Deutsche Bank AG saw its first-quarter earnings fall by around a third as customers were more reluctant to trade and invest because of Europe's debt crisis.
Germany's largest bank said Thursday that its net profit in the first three months of the year fell to €1.4 billion ($1.85 billion) from €2.1 billion in the same quarter a year ago.
The result failed to meet expectations and the company's share price slid 4 percent to €32.76 in morning trading in Frankfurt — the consensus in the markets was for a profit of around €1.65 billion.
A more detailed look at the bank's statement shows that revenues fell 12 percent to €9.2 billion, with customers reluctant to trade at both the investment banking division, which earns money from doing deals and trading stocks and bonds, and at the retail end through the company's Postbank branch banking business.
Revenues at the corporate and investment bank division, a key pillar of earnings, fell by 8 percent to €6.2 billion ($8.19 billion) in what it called "a far less favorable environment compared to the prior year quarter."
The division recovered somewhat from the turbulence that hit European markets in the second half of last year but that didn't match the same quarter a year ago. European markets were roiled late last year by fears that a financially troubled large country such as Spain or Italy might default on its debts, fears that eased somewhat during the first quarter. Still revenue from trading debt fell €301 million and stock trading was down €218 million, or 23 percent, from the year earlier quarter.
The company said "a strong result which reflects good performance across most businesses, despite continued risk discipline and lower client activity than in the prior year."
The bank also took a €257 million writedown as it exited a loan to pharmaceutical company Actavis, which is being bought by Watson Pharmaceuticals. It also took a €210 million charge for litigation expenses. Ending the bank's exposure to Actavis would result in a boost to its capital cushion against losses, it said.
The figures were the last quarterly earnings reported by CEO Josef Ackermann before he hands the bank over to incoming co-CEOs Anshu Jain and Juergen Fitschen at the end of the company's May 31 shareholders' meeting. Ackermann said in a statement that "against a background of continuing caution in global financial markets we delivered solid results."
The company saw a decline in earnings at its consumer banking division which includes Postbank. Postbank revenues fell to €972 million from €1.3 billion as the unit shed riskier assets and faced a more adverse interest-rate environment. Advisory and brokerage revenues fell because of "the ongoing reluctance of retail clients to invest."
Chief financial officer Stefan Krause said on a conference call with analysts that Postbank's performance did not reflect its expected future earnings, citing "subdued client activity." He also noted that the business does not yet offer the full range of Deutsche Bank products. Deutsche Bank took majority control of Postbank, formerly owned by Deutsche Post, in 2010.
He also said that Deutsche Bank had tapped the Feb. 29 emergency credit offering of cheap, long-term loans from the European Central Bank, taking what he described as "a small amount for some of our corporate and retail business in Europe."
