Deutsche Bank Down on €1 Billion Drop in Profits

German banking powerhouse Deutsche Bank DBK tumbled over 2% in trading Thursday morning as it reported a steep drop in net income, from €601million to €147 million. The 76% drop in earnings was far from analyst estimates of €566 million. The company also reported a loss of €422 million. While all eyes in Europe remain fixed on the sovereign debt crisis that has stymied economic growth throughout the eurozone and nearby economies, particularly Britain, the resulting loss of investment opportunities hit the German bank the most, as trading continues to decline and holding writedowns batter the bank's bottom line. Despite the fall, the bank's share price is still over 10% higher than a month ago, thanks largely to hope that European Central Bank intervention would lower bond yields in the PIIGS economies (Portugal, Ireland, Italy, Greece, and Spain) and provide liquidity to European institutions. The loss means that the bank's year-on-year performance has suffered a decline of over €1 billion. A year ago, the company posted a pretax profit of €603 million. The company had lowered its earnings forecast last November and announced that it would be firing 500 people due to an "unabated slowdown in client activity." As expected, revenues declined, especially in debt trading, which fell over 35% to €1.04 billion. Equity trading also fell over 61% to €539 million. Earlier this year, American investment banks such as JPMorgan JPM, Goldman Sachs GS, and Morgan Stanley MS posted a drop in revenues, while trading volumes remain low.