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Deutsche Bank chief seeks to reassure

paul@bluesearchltd.co.uk

Josef Ackermann on Tuesday admitted that Deutsche Bank’s investment banking business had been hit by the recent turmoil in credit markets, but sought to reassure the market that liquidity was returning and said he was satisfied with the bank’s overall performance.

Mr Ackermann said the market conditions had “inevitably” affected the bank in August, “notably in sales and trading and corporate finance.”

“Market corrections, triggered in part by the drying-up of liquidity, have been significant and impacted mark-to-market valuations in our trading books and leveraged loan book. Going forward, these valuations will depend on how the market develops,” he told a banking conference in Frankfurt.

Deutsche Bank has already shut one of its credit proprietary trading desks, which invests the bank’s own money, after it lost about €100m.

The losses mark a sharp turn in Deutsche Bank’s fortunes. The bank profited from betting on the fallout of the US subprime mortgage market, but other parts of the trading business have been hit as risk-aversion spread to other asset classes in the market.

Mr Ackermann said the bank’s customer-oriented trading and banking business had performed well and he continued to be satisfied with the other businesses, such as private and retail banking, asset management and transaction banking.

He added that trading and funding conditions in the markets were starting to improve, saying: “In the last few days, there have been signs that markets begin to stabilise. Liquidity is returning.”

The comments helped push Deutsche Bank shares up nearly 3 per cent. The stock has dropped more than 18 per cent in the past two months on concerns that the bank would be hit by the market volatility. The bank, Germany’s largest, operates one of the biggest fixed income and trading businesses in the investment banking industry.

Mr Ackermann also said the availability of funding had “not been a problem for Deutsche Bank in recent weeks.”

The bank last week became the first bank to issue senior bonds in the euro market since the collapse of IKB, a lender to small German companies, due to its exposure to the US subprime mortgage markets. It sold €1.75bn of paper with a 10-year maturity, following a similar $3bn deal earlier in the month.

The bank had to offer a sharply higher yield premium to investors than it paid before the summer, reflecting the lower availability of capital amid rising risk aversion among credit investors.