Barclays and Deutsche Had a Contrasting Quarter

Updated on

Barclays and Deutsche Had a Contrasting Quarter

Two big investment banks Deutsche Bank AG (NYSE:DB) and Barclays PLC (NYSE:BCS)  just recently reported quarter earnings with contrasting results. Deutsche Bank AG (NYSE:DB), dubbed as the largest German investment bank, tremendously fell short of its target earnings by as much as 34%, while Barclays PLC (NYSE:BCS) reported better-than-expected earnings.

The current European debt crisis in Europe has taken its toll on . This is further aggravated Deutsche Bank AG (NYSE:DB) by the company’s lawsuit issues that cost the bank about 210 million euros in lawsuit fees.

While the net profit of Deutsche Bank AG (NYSE:DB) fell to only 1.4 billion euros compared to its previous year’s earnings at 2.1 billion euros, its retiring chief executive, Josef Ackerman, still proudly announced during a press release that the company delivered a solid performance. Deutsche Bank AG (NYSE:DB) still posted generous earning amidst the uncertainty that hounds the global financial market.

Barclays PLC (NYSE:BCS), on the other hand, is enjoying rise in profit in the midst of strengthened investment banking performance. Its earnings surpassed expectations, delivering a 22% increase in pre-tax profit at £2.4 billion compared to its earnings during the same period in the previous year.

The results may be encouraging, but its chief executive, Robert E. Diamond, Jr., said that ‘the environment in which we operate remains unpredictable.’ To remain competitive and to keep the bank on tract of its projections, it has to cut down costs. That is just what the bank has been doing that includes cutting jobs.

In fact, the bank already announced that it is poised to eliminate about 3,500 more positions in order to improve its profitability. This move should keep Barclays PLC (NYSE:BCS) on track of its goals in achieving a 13% increase in profits compared to last year’s increase of only 6.6%. The profitability goal of Barclays PLC (NYSE:BCS)  must be achieved. Otherwise, its chief executive is ready to let go of his hefty deferred share bonus of about £2.7 million if the projections are not met.

On the trading floors, both Barclays PLC (NYSE:BCS) and Deutsche Bank AG (NYSE:DB) made quite impressive performances. Despite the below-expectation earnings of Deutsche Bank AG (NYSE:DB), its share price still managed to post a $1.37 or 3.11% increase at $45.47 closing price, compared to its previous day’s closing price of $44.10. Investors’ confidence on Deutsche Bank AG (NYSE:DB) remain, considering that the bank still managed to generate earnings despite the looming financial market in Europe.

 Barclays PLC (NYSE:BCS) share price also gained by 0.15 or 1.1% increase, closing the trading day at $13.74 versus the previous day’s closing price of $13.59. The renewed confidence of investors on both investment banks are brought about by their alliances to bid for American International Group, Inc. (NYSE:AIG)  assets under the Maiden Lane III (as we reported earlier this morning).

Maiden Lane III is a special entity created by the Federal Reserve Bank of New York during the financial turmoil that hit the global market. This entity took about $30 billion in assets from different banks in Wall Street. Maiden Lane III saved many Wall Street banks from incurring more losses on collateralized debt obligations.

The New York Fed is scheduled to auction the MAX C.D.O. package on Thursday, April 26, in an effort to ease the financial burden of American International Group, Inc. (NYSE:AIG) The alliance of Barclays PLC (NYSE:BCS) and Deutsche Bank AG (NYSE:DB) gave both banks an edge over the other alliances that made a bid on the auctioned commercial and real estate securities.

Leave a Comment