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Deutsche Bank issues profit warning

By Geir Moulson

Associated Press

Published: Tuesday, Oct. 4 2011 5:55 a.m. MDT

BERLIN — Deutsche Bank issued a profit warning on Tuesday, saying that it could no longer reach its full-year target amid market turbulence caused by the deepening debt crisis and more charges on Greek government debt.

Deutsche Bank AG shares were down 6.2 percent at €24.15 after the announcement.

Germany's biggest bank said its pre-tax earnings target for this year of €10 billion ($13.3 billion) from its core businesses is "no longer achievable."

Third-quarter results at the corporate banking and securities division will come in "significantly lower than expected," Deutsche Bank said in a brief statement.

The company said it would consider "additional cost controls" in light of the "significant and unabated slowdown in client activity," and that some 500 jobs will be cut at the division in this year's fourth quarter and next year's first quarter — mostly outside Germany.

It said the intensifying eurozone debt crisis led to sustained uncertainty among market participants "and thus to significantly reduced volumes and revenues." In addition, the company said the quarter's results were hit by operating costs related to an "indirect tax position."

In July, shortly after eurozone leaders agreed on a second bailout package for Greece that would see the private sector take a hit, Deutsche Bank said in its second-quarter earnings report that it had written down €155 million on Greek government debt.

It said Tuesday that it would take charges of another €250 million on Greek debt in the third quarter.

Germany has raised the possibility of renegotiating the planned second Greek bailout, worth €109 billion, but fellow eurozone heavyweight France has pushed for it to remain unchanged.

Deutsche Bank CEO Josef Ackermann — who also chairs the Institute of International Finance, which has led negotiations on private-sector involvement — has rejected calls to impose larger losses on private investors.

"I personally am very convinced that any short-term restructuring of Greek debt could provoke a contagion which would need much higher ring-fencing ammunition" for other countries, Ackermann said in a speech to a conference in London on Tuesday.

"One of the big problems is that the people in Germany and those in other countries are no longer willing to transfer even more money" into stabilization funds, he added.

Germany's parliament last week approved plans to boost the powers of the eurozone's bailout fund, the €440 billion European Financial Stability Facility, but there's little appetite in the government for any further increase in its headline lending capacity.

Despite the problems, Ackermann said he was convinced Europe would get a grip on its problems — eventually.

"A lot of people have lost confidence in whether Europe is going to make it," he conceded. "My strong conviction is, yes, we will, but it will take much longer than some people think — and that will have an impact on the real economy but also an impact on the financial markets."

Ackermann said he believes that "the EU and the European leaders will do everything to defend the euro and the eurozone, but that it will be an expensive and difficult exercise."

Deutsche Bank said that it still expects an overall third-quarter profit and "expects a robust earnings level for the full year 2011," though it did not provide a specific figure.

The company is confident that its classic banking businesses — the private clients, asset management and global transaction banking divisions — "will deliver their best pre-tax profit ever," it added.

Deutsche Bank is to issue its third-quarter earnings report on Oct. 25.

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