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First came the Swedes. Then the Brits. The Americans also seem keen, as do the French and Germans. When it comes to imposing a special tax on banks, a cursory glance at the countries that favour the levies suggests that the world is united. However, there are some noteworthy dissenters and even among those who agree on the principle of bank taxes there are disagreements over details.
Read more at Financial Services Briefing: “Entente fiscale” (June 24th)
Deutsche Bank beat analyst expectations when announcing its latest quarterly profits. Its net earnings for the first quarter of this year, €1.8bn, rose by 50% versus the previous year. This result was fuelled by a record-setting quarterly performance in its investment banking business.
Instead of celebrating this stellar result, the bank’s share price fell as investors fretted about the group’s business mix. With more than 90% of the bank’s pre-tax profit coming from its investment banking unit, Deutsche Bank appears dangerously exposed to regulatory changes that, at minimum, seem destined to hike capital requirements related to many risky activities inherent in investment banking. The bank’s capital ratios are already low compared with many of its main rivals—the subject of an analysis on this blog’s parent site (subscription required)—giving investors more cause for concern, despite the positive headline results.
In the Deutsche Bundesbank’s latest Financial Stability Review, the German central bank reckons that the country’s lenders are in for another €50bn to €75bn in write-downs by the end of next year. These estimates, of course, are subject to major qualifications, as are similar forecasts for lenders elsewhere.
Helpfully, the Bundesbank assembles charts tracking the total loan-loss forecasts for the financial crisis made by other major institutions. Although the scopes and methodologies differ—see page 57 in the report for the full list of caveats—a clear trend is established: “estimates initially rose dramatically but are now cautiously receding.” Even if there is more pain in store, the ultimate damage will not be as great as once feared.
Deutsche Bank reported third-quarter results today, filling in details from a preliminary announcement last week. Its unexpected pre-announcement of headline earnings figures was overshadowed by blow-out results from the investment banking divisions of American rivals.
Although all of the German group’s divisions were profitable in the third quarter, the investment bank’s €988m pre-tax profit accounted for three-quarters of Deutsche Bank’s overall earnings. As is becoming customary, another way of gauging the health of the investment bank is to look at how much it pays its employees. (Amidst widespread anger and resentment over bankers’ pay, this could be called a bank’s “gumption gauge” or “swagger scale”.)
In the first nine months of this year, the average worker at Deutsche’s investment bank earned around €280,000, already more than the €259,000 earned in 2008 as a whole.