Josef Ackermann, who ends a 10-year reign as Deutsche Bank AG (DBK)’s chief executive officer today, said financial market activity remains “muted” as Europe’s debt crisis and a slowdown in Germany and Asia threaten to damp the global economy.
“Companies in what has been our previously very robust home market, Germany, have been lowering their expectations,” he said in a speech at the bank’s annual shareholder meeting in Frankfurt. “Financial market activity remains muted.”
Ackermann, 64, is stepping down after leading Deutsche Bank through the 2008 financial crisis without direct government aid and transforming Germany’s biggest lender into an international investment bank. The Swiss-born banker, who has counseled European political leaders in their efforts to save the euro, hands over to Anshu Jain, the head of the investment bank, and Germany CEO Juergen Fitschen.
Deutsche Bank is changing leaders as concern that Greece will exit the currency union sends tremors through Europe’s financial system. The euro has declined to the lowest against the dollar in almost two years.
Grounds for Concern
“The economic conditions, debt levels and the lack of will to carry out reform in a few countries of the euro zone continue to give rise to concern,” Ackermann said.
The sovereign debt crisis has dented the bank’s earnings. Deutsche Bank said on April 26 that business conditions worsened in April amid a lower appetite for risk from clients. The lender announced 500 job cuts in October after scrapping its operating pretax profit forecast of 10 billion euros ($12.4 billion) for 2011, citing a “significant and unabated slowdown in client activity.” That program has been completed, Chief Financial Officer Stefan Krause said on April 26.
Deutsche Bank surpassed France’s BNP Paribas SA last year to become Europe’s largest bank, with assets equivalent to more than 80 percent of the German economy.
The German bank “is well prepared” for adverse conditions thanks to the breadth of its businesses, Ackermann said.
In addition to building out the investment bank, over the last three years, Ackermann oversaw the acquisition of German consumer lender Deutsche Postbank AG (DPB), wealth manager Sal. Oppenheim Group and part of ABN Amro Holding NV to add businesses with less volatile revenues than investment banking.
The share price decline of almost 60 percent during his decade in charge, compared with an almost 70 percent drop in the Bloomberg Europe Banks and Financial Services Index over the same period. Deutsche Bank gained 1.1 percent to 29.15 euros as of 12:28 p.m. in Frankfurt trading.
The European Central Bank flooded banks with more than 1 trillion euros in low-cost three-year loans in December and February to head off a credit crunch, encourage lending to companies and households, and spur demand for unsecured bank debt.
Banks tightened credit standards much less in the first quarter than in the previous three months and expect more demand for corporate loans in the second quarter, an ECB survey showed on April 25. Deutsche Bank tapped the ECB for a “small amount” for some businesses in continental Europe, Krause said on April 26.
Deutsche Bank reduced its net risks related to Greek sovereign bonds to 94 million euros at the end of March from 1.6 billion euros at the end of 2010 by taking part in Greece’s debt swap and allowing notes to mature, according to company presentations on the Frankfurt-based bank’s website.
The lender had 1.9 billion euros in Italian sovereign debt, 1.4 billion euros in Spanish sovereign bonds, 350 million euros in Irish sovereign debt and 189 million euros in Portuguese state debt as of March 31, according to a company presentation.
Ackermann defended Deutsche Bank’s target of generating a 25 percent return on equity, which he said was criticized by some in Germany as a “sign of greed.”
“We never considered the 25 percent figure as an end in itself,” he said in his speech to shareholders. “We simply wanted to be as profitable as the best banks in the world. This was and is the only way for us to successfully compete at the global level over the long term and for Germany to retain the global bank it deserves.”
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