Deutsche Bank AG (DB) Chief Executive Josef Ackermann is not buying all the talk about economic recovery beginning to take hold.
In fact, the head of Germany's biggest bank went out of his way to raise red flags about things that may still go further south. Earlier this week, Deutsche Bank set aside about $1 billion for risky loans in the second quarter, a seven fold increase, according to Bloomberg News. Unemployment in the 27-member European Union hit a 13-year high in June of 9.4 percent. Many economists expect the U.S. joblessness rate to surpass 10 percent by the end of next year.
"The crisis is not over," Ackermann said. "When one looks at the developments of global economic growth, then it can be expected that starting in the second half of this year we slowly move into the positive territory. But we're still moving on a low level."
His pessimism is comparable to Bank of America Corp. (BAC) CEO Kenneth Lewis' recent comments that "reserve increases will most likely continue for the remainder of 2009, although not at the levels we experienced in the first six months of the year." JPMorgan Chase & Co. (JPM) Chief Financial Officer Mike Cavanagh told investors that it will be "hard" to turn a profit in its credit card business. Goldman Sachs Group Inc. (GS) also spoke of a "cautious" outlook.
Wall Street, though, is turning more optimistic. The economy contracted at a lower-than-expected rate in June. The S&P 500 Index has soared more than 60 percent over the past month. Clearly, many people see a light at the end of a long tunnel.
Unfortunately, we do not yet know whether they are seeing an oncoming train.
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