Deutsche Bank, UBS send out job cuts warning
Source: Bloomberg News |
October 26, 2011, Wednesday
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Print Edition
Print Edition
DEUTSCHE Bank AG and UBS AG, the biggest banks in Germany and Switzerland, respectively, signaled more jobs may be at risk as the European sovereign debt crisis and global economic slowdown crimp investment-banking revenue.
Deutsche Bank Chief Financial Officer Stefan Krause said the Frankfurt-based lender will continue to adjust its "platform" if the environment persists after announcing 500 job cuts earlier this month. His UBS counterpart Tom Naratil said yesterday that a reorganization of the investment bank may lead to lower headcount at the unit.
Europe's biggest investment banks may have little choice but to accelerate asset and cost reductions amid worsening earnings prospects and demands for more capital. UBS in July abandoned its goal of doubling pretax profit by 2014 and Deutsche Bank scrapped its full-year profit target earlier this month as European leaders rush to tackle the Greece-led debt shock that threatens to tip the world into a recession.
"The outlooks were very cautious because if the sovereign debt crisis isn't solved, the eurozone may slip into recession and that would hurt the investment banks," said Michael Rohr, an analyst at Sylvia Quandt Research GmbH in Frankfurt, who has a "neutral" rating on the banks. "There's definitely some fat left to burn, though UBS needs to cut costs more dramatically than Deutsche."
Deutsche Bank and UBS reported earnings a day before European Union leaders meet in Brussels to seal a package to bolster the region's rescue fund, recapitalize banks and convince investors to cut Greece's debt load to prevent contagion from spreading to Italy and Spain.
"The banking business should continue to be influenced during the next months by the volatile global financial markets and lower trading volumes," lowering revenue in investment banking and asset management, Deutsche Bank said yesterday. "Lack of a credible and sustained resolution to the European sovereign debt crisis will continue to adversely impact client activity and revenue generation."
Deutsche Bank reported third-quarter profit that beat analysts' estimates as gains in consumer banking and asset management cushioned a decline in trading revenue. The company had net income of 725 million euros (US$1 billion).
UBS said third-quarter profit dropped 39 percent after reporting a US$2.3 billion loss from unauthorized trading last month. Net income fell to 1.02 billion Swiss francs (US$1.16 billion), surpassing analysts' estimates.
"Prospects for global economic growth remain largely contingent on the satisfactory resolution of eurozone sovereign debt and banking industry concerns, as well as issues surrounding US economic growth, employment and the US federal budget deficit," the Swiss bank said. "In the absence of such developments, current market conditions and trading activity are unlikely to improve materially, potentially creating headwinds for growth in revenues and net new money."
Deutsche Bank Chief Financial Officer Stefan Krause said the Frankfurt-based lender will continue to adjust its "platform" if the environment persists after announcing 500 job cuts earlier this month. His UBS counterpart Tom Naratil said yesterday that a reorganization of the investment bank may lead to lower headcount at the unit.
Europe's biggest investment banks may have little choice but to accelerate asset and cost reductions amid worsening earnings prospects and demands for more capital. UBS in July abandoned its goal of doubling pretax profit by 2014 and Deutsche Bank scrapped its full-year profit target earlier this month as European leaders rush to tackle the Greece-led debt shock that threatens to tip the world into a recession.
"The outlooks were very cautious because if the sovereign debt crisis isn't solved, the eurozone may slip into recession and that would hurt the investment banks," said Michael Rohr, an analyst at Sylvia Quandt Research GmbH in Frankfurt, who has a "neutral" rating on the banks. "There's definitely some fat left to burn, though UBS needs to cut costs more dramatically than Deutsche."
Deutsche Bank and UBS reported earnings a day before European Union leaders meet in Brussels to seal a package to bolster the region's rescue fund, recapitalize banks and convince investors to cut Greece's debt load to prevent contagion from spreading to Italy and Spain.
"The banking business should continue to be influenced during the next months by the volatile global financial markets and lower trading volumes," lowering revenue in investment banking and asset management, Deutsche Bank said yesterday. "Lack of a credible and sustained resolution to the European sovereign debt crisis will continue to adversely impact client activity and revenue generation."
Deutsche Bank reported third-quarter profit that beat analysts' estimates as gains in consumer banking and asset management cushioned a decline in trading revenue. The company had net income of 725 million euros (US$1 billion).
UBS said third-quarter profit dropped 39 percent after reporting a US$2.3 billion loss from unauthorized trading last month. Net income fell to 1.02 billion Swiss francs (US$1.16 billion), surpassing analysts' estimates.
"Prospects for global economic growth remain largely contingent on the satisfactory resolution of eurozone sovereign debt and banking industry concerns, as well as issues surrounding US economic growth, employment and the US federal budget deficit," the Swiss bank said. "In the absence of such developments, current market conditions and trading activity are unlikely to improve materially, potentially creating headwinds for growth in revenues and net new money."
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