European debt crisis eats into profits of top banks

FRANKFURT - Agence France-Presse

File picture shows the headquarters of Deutsche Bankin Frankfurt, Germany. Germany’s largest bank says earnings fell 46 percent in the second quarter as the eurozone debt crisis hurt investment banking activity and revenue from trading securities. AFP photo

Europe’s biggest banks yesterday took massive hits on their second-quarter profits as the eurozone debt crisis slices into earnings and adds to the pressure to boost their capital defences.

In Germany, the country’s biggest lender Deutsche Bank said its bottom-line profit was slashed nearly in half in the period from April to June. In neighbouring Switzerland, giant UBS blamed a 58-percent slump in second-quarter net profit on lower trading and services revenues while operating costs rose.

In Spain, the country’s second biggest bank, BBVA, said its earnings slumped due to a drastic rise in provisions, ordered by the government to cover its exposure to the beleaguered real-estate market.
And in Austria, the number one lender Erste Bank, a specialist in Eastern Europe, saw its second-quarter net profit tumble 46 percent owing to problems in Hungary and Romania.

Banks earn a big chunk of their profits from their dealings on financial markets where they have not only sustained losses from falling asset prices, but are also feeling the pain from a downturn in investor activity, said Deutsche Bank’s new co-chief executives Anshu Jain and Juergen Fitschen.

Crisis hits client activity

“The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank,” the two said.

Deutsche’s performance in the April-June period “was impacted by a volatile environment” and net profit fell to 661 million euros ($811 million) in the three months to June from 1.2 billion euros a year earlier. Revenues were down 6 percent at 8 billion euros.

In Zurich, UBS chief executive Sergio Ermotti said his group was determined to “consolidate its position as the best capitalized bank.”

Ermotti was cautious on the outlook for UBS, noting the eurozone debt crisis, US debt levels and geopolitical tensions which will

“continue to influence client confidence ... and third quarter activity.” In Spain, BBVA’s net profit slumped 57.5 percent to 505 million euros in the three months to June, much worse than analysts’ already pessimistic forecasts.

Madrid has ordered Spanish banks to clean up their balance sheets once and for all to ease market pressure that has also driven up the government’s cost of borrowing to a level near where other eurozone countries were forced to seek international aid.

Mitsubishi UFJ Financial Group, Japan’s biggest bank, said yesterday its quarterly net profit slumped 63.5 percent from a year earlier. The lender posted a net profit of 182.9 billion yen ($2.3 billion) for the three months to June, down from 500.6 billion yen a year ago, while revenue fell 17.7 percent to 1.20 trillion yen.

The lender has recently expressed an open interest in entering the Turkish market.

Separately, Greece’s Alpha Bank said yesterday it has made an offer to Credit Agricole to buy the French bank’s subsidiary Emporiki Bank, but denied reports that a deal had already been clinched.

“Alpha Bank announces that it has filed an offer with Credit Agricole for the purchase of shares representing the entire share capital of Emporiki Bank,” the second-largest Greek lender said in a statement.