Oct. 29 (Bloomberg) -- Deutsche Bank AG, Germany’s biggest bank, said improved capital markets and investors’ increasing appetite for risk should bolster securities firms in the fourth quarter.

Deutsche Bank’s investment bank posted pretax profit of 988 million euros ($1.45 billion) in the third quarter, exceeding analysts’ estimates, on equity and debt sales and trading. Net income more than tripled to 1.38 billion euros, or 2.10 euros per share, from 435 million euros, or 83 cents, a year earlier, the Frankfurt-based bank said in a statement today.

The company benefited from the record-low interest rates that helped Credit Suisse Group AG post its highest quarterly profit in more than two years. In the current quarter, stabilization in the money and capital markets, reduced volatility and rising asset valuations “should support banks’ securities business,” the company said.

“Deutsche Bank profited from the improved stock and bond markets,” said Peter Braendle, who helps manage about $59 billion at Swisscanto Asset Management in Zurich, including Deutsche Bank shares. “But the expectations are extremely high, and the question is can they fulfill those.”

Deutsche Bank gained 2.74 euros, or 5.6 percent, to 51.64 euros in Frankfurt trading. The stock gained 86 percent this year, valuing the company at about 32 billion euros. That compares with a 45 percent increase in the Bloomberg Europe Banks and Financial Services Index, which tracks 63 stocks.

The bank released preliminary net income figures last week.

Acquisitions

Chief Executive Officer Josef Ackermann, who dodged the worst of the financial crisis, agreed to two purchases this month to cut reliance on investment banking should markets worsen again.

Deutsche Bank yesterday agreed to buy Sal. Oppenheim Group, Germany’s biggest independent private bank, for 1 billion euros to bolster asset and wealth management. The purchase will almost double Deutsche Bank’s assets under management in the private- wealth unit to more than 300 billion euros and add about 150 million euros in operating profit a year, based on estimates by Morgan Stanley analysts.

Deutsche Bank reached a preliminary agreement on Oct. 20 to buy ABN Amro Holding NV’s commercial-banking operations in the Netherlands for an undisclosed price. The bank also purchased a stake in German retail lender Deutsche Postbank AG earlier this year and has an option to increase the holding.

Credit Suisse, JPMorgan

“Deutsche Bank has proved its resilience in an exceptionally tough environment, and has indeed emerged stronger from the crisis,” Ackermann, 61, said in the statement today. “This creates opportunities for us to bolster our long-term competitive position.”

Credit Suisse, Switzerland’s biggest bank by market value, last week reported net income of 2.35 billion Swiss francs ($2.3 billion) in the third quarter on trading gains, after a loss a year earlier. JPMorgan Chase & Co. reported earlier this month its highest profit since the subprime mortgage market collapsed, while earnings at Goldman Sachs Group Inc. more than tripled, helped by investment banking. Both banks are based in New York.

Deutsche Bank’s investment bank, run by Anshu Jain and Michael Cohrs, posted a pretax profit after a loss a year earlier as sales and trading revenue rose to 3.12 billion euros. Analysts estimated earnings of 811 million euros at the unit.

Deutsche Bank’s global markets business, run by Jain, had debt trading income of 2.2 billion euros, up from 924 million euros a year earlier. Equity trading generated 918 million euros in revenue, the most since 2007.

Compensation Costs

The asset and wealth management business had pretax earnings of 134 million euros, returning to a profit after four quarterly losses. Earnings at the consumer bank fell 43 percent to 149 million euros from 262 million euros a year ago.

Deutsche Bank set aside 1.3 billion euros for compensation and benefits at the corporate and investment bank, which includes the securities unit and transaction banking, in the third quarter, more than double the year-earlier period.

The company set aside 544 million euros for possible loan defaults in the quarter, up from 236 million euros a year earlier. Earnings at Deutsche Bank were boosted by 369 million euros in net tax gains.

Deutsche Bank had a pretax return on equity, a measure of profitability, excluding one-time gains, of 14 percent in the quarter. The bank’s core tier 1 ratio, a measure of financial strength monitored by regulators, was 8.1 percent at the end of the third quarter, up from 7.8 percent in the second.

To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Friedrich Bettinga at jbettinga@bloomberg.net

Last Updated: October 29, 2009 12:48 EDT