Deutsche Bank is having a bad day, but keep it hush and don’t tell investors. Have a peek at what’s happened:
Deutsche Bank AG’s profit slumped 64 percent in the second quarter as financial market turbulence from the U.S. credit crisis led to 2.3 billion euros in write-downs - more than previously estimated - but investors appeared reassured, with its shares trading higher after the report was released.
Investors appeared satisfied that the bank did not post a second consecutive quarterly loss, pushing its shares up 41 cents to $93.10 in morning trading in the U.S.
Well, it’s more likely that the SEC’s comforted shareholders by forbidding investors from naked short selling Deutsche Bank stock. It doesn’t seem very likely that investors were reassured by these results:
Total assets held at fair value which are measured using valuation techniques with unobservable parameters (”Level 3″) were € 86 billion as of June 30, 2008, which was equivalent to 6 % of total fair value assets (versus € 88 billion, or 6 %, as of December 31, 2007).
PROVISION FOR CREDIT LOSSES was € 135 million, versus € 81 million in the second quarter 2007. This development
reflects lower releases and recoveries within CB&S, together with higher provisions in PBC, which in turn mainly
reflect that division’s organic growth in consumer finance, principally in Poland, and increased credit costs in Spain.
PROVISION FOR CREDIT LOSSES was € 249 million in the first half of 2008, up 40 % from € 178 million in the first
half of 2007. This increase was mainly attributable to lower releases of provisions in CB&S and increases in PBC from
organic growth in consumer finance, principally in Poland, and increased credit costs in Spain.
Come to think of it, investors probably aren’t thrilled about Standard & Poor’s credit rating haircut either.
The only thing truly comforting to investors are earnings, so if they are comforted by holding shares of Deutsche Bank, they must believe the credit crisis is behind us and that earnings are now on their way.
We Don’t! And neither does Deutsche Bank! Take a look:
Germany’s economic downturn will to be harsher than many businesses expect, Deutsche Bank’s chief economist was reported as saying on Saturday, after some leading companies showed signs of suffering from the global slowdown.
And with the credit crunch just setting, in neither should you.
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