Deutsche Bank Profit Rises on Record Consumer Bank Earnings
Deutsche Bank CEO Josef Ackermann
Hannelore Foerster/Bloomberg
Josef Ackermann, chief executive officer of Deutsche Bank AG.
Josef Ackermann, chief executive officer of Deutsche Bank AG. Photographer: Hannelore Foerster/Bloomberg
Deutsche Bank Profit Rises on Record Consumer Bank Earnings
Ralph Orlowski/Bloomberg
The headquarters of Deutsche Bank AG stand in Frankfurt.
The headquarters of Deutsche Bank AG stand in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
Deutsche Bank Profit Rises on Record Consumer Bank Earnings
Sepp Spiegl/Bloomberg
Chief Executive Officer Josef Ackermann is counting on acquisitions such as Deutsche Postbank AG and gains at the investment bank to boost operating pretax profit to 10 billion euros this year.
Chief Executive Officer Josef Ackermann is counting on acquisitions such as Deutsche Postbank AG and gains at the investment bank to boost operating pretax profit to 10 billion euros this year. Photographer: Sepp Spiegl/Bloomberg
Deutsche Bank AG (DBK), Germany’s biggest bank, reported a 17 percent increase in first-quarter profit, exceeding analyst estimates on record earnings at the consumer- banking and asset-management units.
Deutsche Bank rose as much as 4.4 percent in Frankfurt trading after saying net income climbed to 2.1 billion euros ($3.1 billion), the second-highest quarterly result ever and more than the 1.8 billion-euro average estimate of 11 analysts surveyed by Bloomberg.
Chief Executive Officer Josef Ackermann is counting on acquisitions such as Deutsche Postbank AG (DPB) and gains at the investment bank to boost operating pretax profit to 10 billion euros this year. UBS AG (UBSN) and Credit Suisse Group AG, Switzerland’s largest banks, as well as Barclays Plc (BARC) of the U.K., had declines in net income as investment-banking revenue fell.
“Retail banking and asset management were very good, helped by the acquisitions,” said Christian Hamann, a Hamburg- based analyst at Hamburger Sparkasse, with a “hold” rating on the stock. “Now I can almost imagine that the full-year target is reachable if the environment remains relatively good.”
Pretax profit at the corporate and investment bank, led by Anshu Jain, decreased 12 percent to 2.3 billion euros, a smaller decline than analysts estimated. Sales and trading revenue slid 3 percent, compared with an average 20 percent drop at U.S. competitors Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc., Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS), according to Bloomberg data.
‘Successful Start’
Deutsche Bank gained 1.79 euros to 43.59 euros by 9:31 a.m., giving it a market value of about 40.5 billion euros. The Bloomberg Europe Banks and Financial Services Index of 48 stocks rose 0.5 percent today.
Ackermann bought Bonn-based consumer lender Postbank, private-wealth manager Sal. Oppenheim and ABN Amro Holding NV’s commercial-banking operations in the Netherlands in the last two years to reduce dependence on the securities unit. The goal is to cut earnings from corporate banking and securities to less than 60 percent of the total by 2013 from 71 percent in 2009.
“Deutsche Bank has made a successful start to the year,” Ackermann, 63, said in today’s statement. “We will continue to invest in our franchise and are confident that we will deliver on our ambitious target.”
Deutsche Bank’s pretax profit from the operating businesses totaled 3.5 billion euros in the quarter, providing more than a third of its full-year target, the bank said.
Sales and Trading
At the investment bank, sales and trading revenue from debt and other products fell 4 percent to 3.6 billion euros, while equity-trading revenue was unchanged at 943 million euros.
Jain, 48, who took over the corporate and investment bank in July, has been trying to boost cooperation between the finance, trading and transaction units and curb costs by eliminating overlaps. He set up new global and German executive committees for the division, and is expanding equities and commodities to cut reliance on fixed-income trading.
Transaction banking pretax profit more than doubled to 257 million euros in the quarter, helped by the acquisition of the ABN Amro units.
Earnings at the consumer banking unit rose more than fourfold to a record 788 million euros. The acquisition of Postbank last year, which doubled customers to about 29 million, contributed 221 million euros. Deutsche Bank also booked a gain of 236 million euros related to its stake in Huaxia Bank Co. of China.
Rising Revenue
Asset and wealth management, which was reorganized last year and bolstered by the purchase of Sal. Oppenheim, returned to profit, earning 190 million euros in the quarter.
Deutsche Bank’s net revenue climbed about 16 percent to 10.5 billion euros. Net revenue at the six largest U.S. lenders fell 13.3 percent in the first quarter from a year earlier, according to data compiled by Bloomberg.
The bank completed its biggest-ever share sale in October to buy the rest of Postbank and boost reserves ahead of tougher regulatory requirements. Deutsche Bank’s core Tier 1 capital ratio, a measure of financial strength that excludes certain hybrid instruments, rose to 9.6 percent at the end of March from 8.7 percent at the end of 2010.
Ninety European lenders will be expected to maintain a core Tier 1 capital ratio of at least 5 percent under the most adverse scenario in the current round of European Union banking stress tests. Results are scheduled to be published in June.
Provisions for bad loans rose 42 percent to 373 million euros in the quarter because of the Postbank acquisition. Non- interest expenses climbed 19 percent to 7.1 billion euros in the quarter related to acquisitions and higher compensation costs.
To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net
To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net
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