REFILE-WRAPUP 2-Recession, Libor, Facebook punish Europe's banks

ZURICH/FRANKFURT, July 31 (Reuters) - Leading European banks

reported dismal profits on Tuesday, blaming everything from the

continent's debt crisis and Spain's property market crash to

Facebook's disastrous stock market debut.

Within a space of an hour UBS of Switzerland,

Deutsche Bank, BBVA of Spain and Austria's

Erste Bank delivered the bad news on an industry

already beset by investigations into a number of scandals.

Deutsche Bank, Germany's flagship lender, announced it will

axe 1,900 jobs under a plan to cut costs by 3 billion euros

($3.7 billion) and streamline its business. New co-Chief

Executive Anshu Jain said expectations on profitability had

moved "closer to our grim scenario".

Banks are suffering from the euro zone crisis that

politicians are struggling to solve, a transatlantic

investigation into interest rate-rigging and regulators

tightening the screws on the industry.

"This is the longest tunnel I have ever been in and there's

no sign of light at the end of it," said an investor who is a

top 10 shareholder in Royal Bank of Scotland and holds

some other bank shares.

The sharp drop in profits cast doubt on whether formerly

blue riband banking sectors will ever recover the levels of

profitability they enjoyed before the crash of 2008-2009.

"The question is whether we are entering a new paradigm, not

only in investment banking but in wealth management and other

products areas that are going to see lower returns," said Chris

Wheeler, analyst at Mediobanca in London. "We are not going to

return to pre-crisis levels even in wealth management, the

question is how much lower will it be."

UBS, which had recovered well after being bailed out by the

Swiss state, reported its second-quarter profit more than halved

to 425 million Swiss francs as its investment bank made a loss

after trading.

The bank took a 349 million Swiss franc ($356 million) loss

on its role as a market maker on U.S. social networking site

Facebook's flotation in May.

UBS blamed U.S. stock exchange Nasdaq's "gross

mishandling" of the offer and plans to take action against the

exchange. Facebook shares have shed around 40 percent of their

value since the company's ill-starred debut.

AWAITING A RESOLUTION

UBS Chief executive Sergio Ermotti warned investors against

expecting any rapid recovery. "A return of confidence can only

happen when clients believe there is a clear and lasting

resolution to today's economic and political challenges, and

this will take time," he said.

Weak economic growth or outright recession across Europe has

hit the banking industry, not least in Spain where the

government has already agreed to take up to 100 billion euros in

European Union aid to save its most troubled lenders.

A property market crash and recession has hurt even BBVA

, Spain's second biggest bank which is not expected to

need EU help. 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.

BBVA, which is based in the relatively prosperous Basque

country, 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 63 percent, underscoring

the problems facing its new leaders.

In one of his first acts as co-CEO, former investment bank

boss Jain is cutting numbers in what had been nicknamed "Anshu's

Army". Most of the redundancies will come by the end of the year

and be outside Germany - likely to include hundreds in London.

Costs at the investment bank represented 87 percent of

income, and return on equity was just 5 percent, well below its

cost of capital

In Austria, Erste Bank cut its 2012 profit outlook for the

second time in three months in the face of deteriorating

economies across Europe.

By later afternoon, UBS shares were down 6.2 percent, Erste

shed 5.6 percent and Deutsche Bank was down 0.3 percent. BBVA

was flat. The European bank index dipped 2.75 percent.

MORE PAIN

Investors worry there is more pain ahead, particularly in

the fallout from the rate-rigging scandal and in Britain from

mis-selling insurance and complex interest rate hedging

products.

Britain's Barclays was fined $453 million last

month by U.S. and UK regulators for rigging interest rates, and

more banks are expected to be dragged in.

More than a dozen, including UBS and Deutsche Bank, are

being probed by investigators looking at whether Libor and

Euribor benchmark rates were manipulated.

UBS said on Tuesday it had appropriate provisions for all

litigation. Deutsche Bank did not say whether it had set aside

funds for potential costs.

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.

"There appears to be a common denominator: the absence of

appropriate cultural and ethical values to guide bank management

and governance," said George Dallas, director of corporate

governance at F&C Investments.

One bright spot is that banks have remained in the black, in

contrast to the darkest days of 2008/09. Deutsche Bank may need

to raise capital, some analysts reckon, but there appears

unlikely to be an immediate industry-wide dash for cash.

But even banks that are performing relatively well are

struggling to regain investors' trust. S olid results from HSBC

, Europe's biggest bank, on Monday were overshadowed by

its $2 billion hit to cover fines and mis-selling.

Source: http://news.yahoo.com/wrapup-1-recession-libor-facebook-pummel-europes-banks-120651582--sector.html

jets air jordans pecan pie recipe prince philip sugar cookie recipe sugar cookie recipe how the grinch stole christmas