This isn’t how Josef Ackermann would have wanted to go out. Yes, he has delivered Deutsche Bank a much stronger capital base, even as the bank increased assets over the year (from €1.9 trillion to €2.2 trillion). The acquisition of Postbank appears to be having the intended benefits. Transaction banking is steaming ahead.
However, full-year profit of €4.3 billion is way off what Ackermann would have hoped for in his last set of annual results. And Q4 returns of €186 million don’t suggest 2012 will be much better.
Set this against what Ackermann confirmed to Euromoney in July: that he expected Deutsche to hit a group pre-tax earnings level of €10 billion.
That looked on track in the first quarter of 2011, when Deutsche made €3.5 billion. Of course, markets have been tougher than expected since then, although Ackermann’s ringside seat to the eurozone crisis perhaps should have told him that would be the case.
Ackermann said: “As a group, we have committed ourselves to making €10 billion in annual pre-tax profit ... The €10 billion target is focusing the way the bank is managed at all levels.”
The management focus will soon enough fall on Anshu Jain, head of Deutsche’s investment bank and soon-to-be joint CEO of the group.
Deutsche’s banking and securities division had a terrible Q4. It was far from alone in that. A loss of more than €400 million tells us more about how bad the markets are than it suggests a weakening of Deutsche’s dominant trading businesses.
Revenues across sales and trading for Q4 were €1.7 billion, compared with €2.5 billion for the same period in 2010. In FICC, Deutsche’s best franchise, revenues were down 15% year on year.
One bit of good news for Ackermann is that the poor performance of the investment bank has allowed him to rebalance Deutsche’s business quicker than even he could have expected: revenues from private clients and asset management outstripped those in Jain’s powerhouse business, which until recently accounted for as much as 80% of revenues.
The biggest sales and trading houses are hoping that, during the next two years, withdrawals and consolidation in the industry will lead to healthier-than-ever margins in FICC – a trend that will be analysed in full in Euromoney’s February cover story. For Deutsche, and its nearest rivals, the hope must be that this comes to pass sooner rather than later.