German financial giant Deutsche Bank AG (DB), Tuesday, said that it made a good start to 2009 and expects to return to profitability in the year, if the global economy, financial markets, legal and regulatory environment, and competitive environment develop as foreseen. The bank also said that as of now, it does not see any requirement for raising new capital from outside.
In the company's Annual Report for the financial year 2008, Josef Ackermann, Chairman of the Management Board, stated, As we look forward in 2009, our industry continues to face significant challenges. A global economic downturn affects all our client segments, and financial markets remain under pressure. Nevertheless, we are confident that Deutsche Bank is correctly positioned to weather these difficult conditions.
In the banking industry, very difficult conditions are expected to persist in the year 2009, and softening demand from clients in some product areas, due to slower economic activity, restrictions on credit availability, and wariness on the part of both private and institutional investors, will adversely impact revenues. Meanwhile, some degree of recovery in the banking industry is foreseeable in 2010, the company said.
Deutsche Bank had reported a net loss of 4.8 billion euros for the fourth quarter, and consequently a net loss of 3.9 billion euros for fiscal 2008, compared with a full-year profit of 6.51 billion euros or 13.05 euros per share a year ago. Deutsche Bank's group net revenues for last year were 13.5 billion euros after mark-downs of 7 billion euros, sharply lower than revenues of 30.7 billion euros after mark-downs of 2.3 billion euros in fiscal 2007.
In its annual report, the company noted that the year 2008 was the most difficult year the banking industry has experienced in recent times. Its huge loss was driven primarily by weaknesses in particular business areas which were exposed by the extreme conditions of the fourth quarter. The company pointed out that if it had elected to use the 'fair value' option on all own debt, it would have booked an additional 5.8 billion euros of profit before taxes in the year 2008.
Deutsche Bank added that it has initiated comprehensive corrective measures in the areas concerned in the light of the weak 2008 results, despite maintaining a solid capital ratio, and strong funding and liquidity position.
Ackermann said, 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 and performance for shareholders. We are convinced that the decisive action we have taken, and the strength of our platform, combined with the right business model, enable Deutsche Bank to face the future with confidence.
According to the company, the worldwide economy, which is experiencing its steepest decline in post-war history, is expected to suffer its first net decline since World War II in the current year. The slump in global demand has hit Germany hard. Real Gross Domestic Product in Germany is projected to shrink by 3.5%, and the company noted that the German economy may see a slight recovery in 2010, with GDP growth of around 1%.
While saying that there is no need to raise capital at this stage, Deutsche Bank noted that its funding and liquidity position was very strong at the end of the year, with the result that its 2009 capital market funding requirements are well below the amounts it raised in 2007 or 2008. The company increased Tier 1 capital by nearly 3 billion euros in the course of 2008, and at the end of the year, BIS Tier 1 ratio was 10.1 %, higher than at the beginning of the credit crisis.
Deutsche Bank added that it is also publishing its Form 20-F, which will be filed with the U.S. Securities and Exchange Commission, or SEC, later Tuesday.
The bank also noted that its total compensation paid to the Management Board in 2008 was 4.48 million euros, sharply lower than 33.18 million euros last year. Total compensation paid to Ackermann was 1.39 million euros, down from prior year's 13.98 million euros.
As per the Annual Report, the total number of shareholders increased significantly in 2008 to 581,938 at year-end 2008 from 360,785 in 2007. The company noted that, of the total, 55% of its shares were held by German investors by end of year 2008, in comparison to 45% last year.
Further, Deutsche Bank said it appointed Michael Cohrs, Jürgen Fitschen, Anshu Jain and Rainer Neske as members of the Management Board of Deutsche Bank at today's meeting of the Supervisory Board. The appointments are for a period of three years with effect from April 1, 2009.
Recent media reports had suggested that any of the four new board members, or incumbent members, can eventually become Ackermann's successor, who is scheduled to step down in 2010.
Among other financial firms, Swiss giant Credit Suisse Group (CS) said Tuesday that it entered 2009 with a strong capital position, a robust business model and a clear strategy. The company said in the 2008 annual report that its fiscal 2008 performance was negatively affected by the weak global economy and the uncertainty prevailing on the financial markets across the globe. For fiscal 2008, the company had reported a net loss of CHF 8.2 billion. Credit Suisse also said it expects the remainder of its approximately 5,300 planned headcount reductions will take place by the middle of 2009.
DB closed Monday's regular trading session at $43.77, up $6.26, on a volume of 2.7 million shares. In the past 52 weeks, shares have been trading in a broad range of $21.13 -$122.98. In the pre-market activity, shares dropped $1.58 or 3.61% to $42.19.
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