Deutsche Bank AG and Credit Suisse Group AG, two of Europe’s biggest banks, said 2009 started well after they posted losses last year and cut the compensation of their chief executive officers by about 90 percent. Deutsche Bank CEO Josef Ackermann said Germany’s biggest bank may return to profit in 2009 after a “good start” to the year. Credit Suisse, Switzerland’s second-biggest bank by assets, is positioned “to prosper when markets recover,” the Zurich-based company said in its annual report, published today. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. said this month that they were profitable in the first two months of the year, lifting the Bloomberg Europe Banks and Financial Services Index by 36 percent in the past two weeks. A revival in Europe’s corporate bond market led to company debt sales of more than 100 billion euros ($135 billion) in 2009, the earliest in the year it has reached that level.
“Both banks have profited from the friendlier environment and recovery in the bond market,” said Lutz Roehmeyer, who helps manage about $14 billion at Landesbank Berlin Investment, including Deutsche Bank shares. “The biggest challenge now is the deepening economic recession and ensuing defaults.” Deutsche Bank rose 4.5 percent to 32.08 euros in Frankfurt trading, bringing its gain in March to 54 percent. Credit Suisse declined 3.7 percent to 35.38 Swiss francs in Zurich, cutting its gain this month to 22 percent.
Earning Less Ackermann, 61, and Dougan, 49, joined top banking executives who earned less in 2008 after forgoing bonuses. Deutsche Bank’s CEO got 1.39 million euros, compared with 14 million euros in 2007, while Dougan received 2.86 million Swiss francs ($2.6 million), down from 22.3 million francs a year earlier. Dougan’s earnings included 1.25 million francs in base pay and 1.58 million francs in dividends on shares that were awarded previously and are still locked in. Britain’s Barclays Plc said today that CEO John Varley received a salary of 1.075 million pounds ($1.58 million) and no bonus for 2008, after earning 2.4 million pounds in salary and bonus the year before. President Robert Diamond got a salary of 250,000 pounds and no bonus, after receiving 6.75 million pounds in 2007, the bank said in its annual report.
“We are very disappointed at our loss in 2008, but absolutely determined to take all necessary measures to restore Deutsche Bank to the path of profitability,” Ackermann wrote in a letter to shareholders published today.
Banking Recovery “We’ll likely see a comeback this year after a horrible fourth quarter,” said Dirk Becker, a Frankfurt-based analyst at Kepler Capital Markets who recommends buying Deutsche Bank. Deutsche Bank forecast “some degree of recovery” in the banking industry in 2010 because of state and central bank aid and a gradual improvement in the global economy and U.S. real estate market. Banks face “several significant challenges” including further writedowns, a deteriorating credit environment and lower demand from clients for complex securities. Deutsche Bank cut 900 jobs at its global markets unit, shut down credit proprietary trading and sold and wrote down assets. The company may cut costs, and headcount, further, it said today, without being more specific.
Ackermann purchased a stake in Deutsche Postbank AG as part of a plan to reduce dependence on investment banking, which generated about half of the group’s earnings in 2007. Wrong-way market bets contributed to a 5.8 billion-euro loss at the investment-banking unit, led by Anshu Jain and Michael Cohrs, in the final three months of last year.
‘Well-Positioned’ Deutsche Bank announced in February a record 4.8 billion- euro net loss for the fourth quarter and its first annual deficit in more than 50 years. Credit Suisse had a net loss of 6.02 billion francs in the fourth quarter. Credit Suisse, which announced 5,300 job cuts in December, said more than half of the posts had been eliminated by the end of last year. The remainder will go by the middle of this year, putting the company “on track” to make cost savings of about 2 billion francs. The bank has used illiquid securities such as leveraged loans and commercial mortgage-backed debt to pay part of the staff bonuses.
“We feel well positioned to succeed in a changing operating environment,” the Swiss bank said, adding that it plans to reduce risk, ensure it has adequate liquidity and keep a “strong capital base.” Deutsche Bank and Credit Suisse skirted the worst of the U.S. subprime mortgage crash that contributed to more than $1.2 trillion of credit losses and writedowns at the world’s largest financial companies.
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