ZURICH: Leading European banks reported dismal profits yesterday, blaming everything from the continent's debt crisis and Spain's property market crash to Facebook's disastrous stock market debut.
Within an hour, UBS of Switzerland, Deutsche Bank, BBVA of Spain and Austria's Erste Bank delivered the bad news on an industry beset by investigations into scandals.
Deutsche Bank, Germany's flagship lender, said it will axe 1,900 jobs to cut costs by three billion euros ($3.7bn) and streamline its business.
Most redundancies will come by the end of the year and outside Germany - likely to include hundreds in London.
The sharp drop in profits cast doubt on whether formerly blue riband banking sectors will recover the levels of profitability they enjoyed before the 2008-2009 crash.
UBS, which recovered after a government bailout, reported its second-quarter profit more than halved to 425 million Swiss francs ($433m) as its investment bank made a loss after trading. It took a 349m franc loss on its role as a market maker on Facebook's flotation in May.
It blamed US stock exchange Nasdaq's "gross mishandling" of the offer and plans to take action against it. Facebook shares have shed around 40 per cent since the debut.
"A return of confidence can only happen when clients believe there is a clear and lasting resolution to economic and political challenges, and this will take time," chief executive Sergio Ermotti warned.
BBVA, Spain's second-top lender, said its first-half profit slumped by a third as it set aside cash to cover losses on its toxic real estate loans, as all the country's banks have been ordered to do.
The bank will have to set aside more in the future and the impact of its sickly home market may be a drag for years.
Deutsche Bank also suffered a drop in trading at its investment bank where profit plunged 63pc.
Costs at the investment bank represented 87pc of income, and return on equity was 5pc, well below its capital cost. It may need to raise capital.
Erste Bank cut its 2012 profit outlook for the second time in three months in the face of deteriorating Europe economies.
Corporate treasurers, pension funds, charities and other investors are seeking advice on whether to pull their money out of banks, nervous that earnings will be eroded for some time by fines in the rate-rigging scandal and in Britain for mis-selling insurance and complex interest rate hedging products.
However, an immediate industry-wide dash for cash appears unlikely due to one bright spot - banks have remained in the black, in contrast to the darkest days of 2008-09.