FRANKFURT, Germany — DEUTSCHE Bank’s second-quarter earnings underperformed market expectations as it wrote down the value of its Greek assets in the wake of last week’s agreement to bailout the country for the second time.

The euro155 million (US$224-million) writedown on bonds issued by Greece was one reason why the bank’s earnings faltered.

The bank said yesterday that its net income during the period rose by only six per cent from a year ago to euro1.23 billion (US$1.79 billion). Over the previous quarter, net profit was down 42 per cent from euro 2.13 billion.

Diluted earnings per share of euro 1.24 (US$1.79) per share were below the consensus prediction of euro 1.35 per share.

Despite the lower-than- expected earnings, the company’s shares held steady partly because the bank’s reliance on the potentially volatile investment banking division is diminishing.

The shares rose more than one per cent after the announcement, then eased to trade down 0.2 per cent at euro 38.15 by early afternoon German time, in line with the wider DAX.

Guido Hoymann, analyst at Metzler Equity Research in Frankfurt, said the results were generally “seen positively by the markets because the reliance on investment banking is decreasing”.

Investors like that because earnings from other activities such as day-to-day consumer banking are steadier than those from deal-driven investment banking, which can involve activities such as mergers and helping companies raise money in capital markets.

“Markets pay higher multiples for non-investment bank earnings simply because they are seen as more predictable, more stable,” Hoymann said.

That was evident in the breakdown of earnings during the quarter. While the business in trading equities suffered from the shockwaves generated by Europe’s debt crisis, with revenue down euro87 million to euro555 million from a year ago, other businesses such as its branch banking fared better.

Overall second-quarter revenues were euro8.54 billion, shy of expectations of euro8.79 billion.

The bank also wrote down its Greek bondholdings ahead of the country’s move to get creditors to accept new bonds that take longer to pay off and bear less interest. Many banks around Europe may well take the same approach after last week’s EU agreement to get the private sector involved in a second bailout for Greece.

Overall, however, the bank reported it has cut its exposure to potential losses from so-called peripheral debt — shaky bonds from Greece, Ireland, Portugal, Spain, and Italy that have been under market pressure due to default fears during the crisis — by some 70 per cent since the beginning of the year, to euro3.7 billion from euro12.1 billion.

“Despite increasingly difficult market conditions, our business model has proven to be robust,” CEO Josef Ackermann said in a statement.

He added that acquisitions, including consumer bank Postbank, private bank Sal Oppenheim, and the Dutch operations of ABN Amro, are contributing to profits now.

The results come just a day after the long-running question of who will replace Ackermann was resolved. Late Monday, the bank said Ackermann will be replaced next year by co-CEOs Anshu Jain, the Indian-born head of its investment bank division, and Juergen Fitschen, currently Deutsche Bank’s head of regional management.

Ackermann, CEO for the past nine years, will not be leaving the company even though he steps down from the top job. He will become chairman of its supervisory board, the German equivalent of a board of directors. The bank said the move will allow it to “continue to profit from his knowledge, experience and professional network”.

The personnel move solves the succession question but has already raised others, not least about how Jain and Fitschen will divide their responsibilities. Chief financial officer Stefan Krause told that Jain and Fitschen’s roles would be worked out in the 10 months remaining before the change.