Josef Ackermann's bravado doesn't match reality at Deutsche Bank

Josef Ackermann's bravado doesn't match reality at Deutsche Bank
Josef Ackermann’s bravado surely can’t be shaken, not if it wasn’t undone by last quarter’s horror show.

By Jeffrey Goldfarb, breakingviews.comLast Updated: 1:52PM GMT 05 Feb 2009
The Deutsche Bank boss remains confident about his investment-banking-heavy business model. He thinks the group can power through a financial crisis and potentially deep recession, despite reporting its first annual loss since just after the Second World War.
Such steely resolve is usually a comfort to investors. But not all of them share Ackermann’s iron-clad view that Deutsche Bank can survive – and “emerge successfully” from this mess – without additional capital, or any siphoning of its gargantuan balance sheet into a government-sponsored “bad bank”.
Deutsche Bank struggled to offer sufficient evidence on Thursday to support its stubborn resistance to such rescue measures. None of its divisions churned out any meaningful profit in the fourth quarter – which led to a €3.9bn net loss for the year. Big gains in foreign exchange and money markets were more than offset by disappointment from the core trading areas of credit and equity derivatives.
What’s more, Deutsche Bank seems to be exhausting its bag of available tricks to deleverage and sustain its capital ratios. A dividend cut released funds that had been accumulated for a higher payout, while a change in pension plan accounting freed up still more.
Some of the bank’s sizeable balance sheet reduction also was down to a bit of smoke and mirrors. Its hefty leveraged loan exposure all but disappeared when two US buyouts collapsed, and another €11bn of assets vanished under new accounting rules.
The woeful performance of the investment bank, the lower profits generated by the retail bank and the loss of funds from private banking and asset management make it hard to see where Ackermann gets his mettle. He is making adjustments, to be sure, but remains “firmly committed to the business model”.
Ackermann touted significant revenue gains in January as one reason to cheer. But it will take considerably more walking the walk to justify the swagger.

http://www.telegraph.co.uk/finance/breakingviewscom/4525321/Josef-Ackermanns-bravado-doesnt-match-reality-at-Deutsche-Bank.html