Deutsche Bank's bad debt provisions soar to €588m

Deutsche Bank's new chief executive Josef Ackermann yesterday said Germany's biggest bank had held up well in the second quarter, despite difficult market conditions that have sent its two main domestic rivals Allianz and HVB plunging into the red.

The bank, however, said its bad debt provisions soared to €588m (£369m) in the second quarter, from €221m a year ago, and more than doubled compared with the first three months of the year, inflated by exposure to the failed engineering group Babcock Borsig and the collapsed US telecoms giant WorldCom.

Mr Ackermann, who succeeded Rolf Breuer on 22 May, is pushing through a plan to shed 14,470 jobs, cut costs by €2bn over the next 18 months and sell the bank's biggest equity holdings, in part to fund a €4bn share buyback.

He said the bank would not contemplate further job cuts until the end of 2003. Deutsche had 84,455 employees at the end of the second quarter, down from 86,524 a year earlier.

Deutsche posted better-than-expected second-quarter profits as a combination of asset sales and cost cuts allowed it to ride out the toughest conditions in German banking for decades.

But the bank cautioned that the business environment was unlikely to improve any time soon with the rate of corporate failures in Germany still to peak and little prospect of a rapid upturn in global markets.

"We are cautious about the short-term prospects for the financial markets and the global economy. Our business environment is likely to remain difficult for the foreseeable future," Mr Ackermann said.

The group beat analysts' forecasts with a 35 per cent rise in pre-tax profits from a year ago to €2.2bn. It recorded second-quarter net gains on industrial holdings of €2.0bn in the period, up from €1.4bn a year earlier.