Bloomberg News

FRANKFURT - Back in February, Deutsche Bank chief executive Rolf Breuer said that he would use his last year there to build up the consumer banking unit, find a distribution partner, and cut expenses in investment banking.

So much for planning. Profit in the second quarter fell 48%, brought down by falling revenue at the consumer banking unit and high costs in investment banking. And Allianz AG, a potential insurance partner, acquired Dresdner Bank AG, which Mr. Breuer wanted to buy last year.

"What Mr. Breuer thought would help stabilize earnings turned out to hit them in the face," said Dirk Bartsch, who helps manage $45 billion at Deutscher Investment Trust, which holds Deutsche Bank shares.

Revenue at the consumer banking and fund management unit, which Mr. Breuer runs, declined almost 2% percent. Overall costs at Deutsche Bank increased 7%.

"We're aiming for flat costs this year," Mr. Breuer said at a press briefing in Frankfurt. He called the bank's second-quarter earnings "respectable."

Mr. Breuer, who has been chief executive since 1997, in November initiated the fourth overhaul of Deutsche Bank in three years. He set up one division for consumer banking and asset management and another for investment banking, now overseen by Josef Ackermann, who will succeed Mr. Breuer in May. The two units were established, replacing five, to cut overhead.

In the first quarter the company predicted that its banking and fund business would help boost pretax profit 30% by 2003. Investment banking was forecast to grow at a 10% rate. Mr. Breuer also set a return-on-equity target of 15% for 2003, excluding any gains from asset sales.

But revenue of the consumer banking-asset management unit and the investment banking unit fell in the second quarter as stock markets continued to stumble.

Deutsche Bank's securities unit, like those of its rivals, suffered in the first half as the benchmark German stock exchange index, DAX, lost 6% and trading on the Frankfurt Stock Exchange fell 8%. It probably will get worse before it gets better, analysts said.

"The second quarter hasn't been great, and the third quarter is traditionally weak," said Marijn Smit, an analyst at ABN Amro in Amsterdam, who rates Deutsche Bank shares a "hold."

In February, Mr. Breuer himself predicted a "bumpy" 2001. And four weeks ago the bank said it would reduce costs by much more than was earlier targeted. (Mr. Breuer announced 2,600 job cuts in February and may announce additional ones.) The bank also said last month that it would cut its Internet investments by more than half.

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