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Deutsche Bank Trading Boosts Profit at Investment Bank

Deutsche Bank's Anshu Jain
Anshu Jain, sole head of Deutsche Bank’s corporate and investment bank since July 2010, is trying to increase cooperation between the trading, finance and transaction units to boost earnings. Photographer: Hannelore Foerster/Bloomberg

Deutsche Bank AG, Germany’s biggest bank, said higher revenue from fixed-income and equities trading lifted fourth-quarter earnings at its investment bank.

Pretax profit at the division rose to 625 million euros ($862 million) from 398 million euros in the year-earlier period, according to a statement today. Revenue from sales and trading climbed 30 percent to 2.44 billion euros, helped by a rebound in asset values, the Frankfurt-based company said.

The German bank’s trading result compares with an 8 percent decline on average at Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp., according to data compiled by Bloomberg. Anshu Jain, sole head of Deutsche Bank’s corporate and investment bank since July 2010, is trying to increase cooperation between the trading, finance and transaction units to boost earnings.

“Deutsche Bank performed better than many of its U.S. peers in sales and trading,” said Andreas Plaesier, a Hamburg-based analyst at M.M. Warburg who recommends buying the shares. “It has been winning market share since the financial crisis.”

Deutsche Bank shares rose 2 percent to 45.32 euros as of 10:35 a.m. in Frankfurt trading. They have rallied 16 percent this year, valuing the company at about 42 billion euros. The Bloomberg Europe Banks and Financial Services Index of 48 companies has climbed 12 percent in the period.

Deutsche Bank already reported net income and revenue in a preliminary statement on Jan. 31.

Net Income, Revenue

Fourth-quarter profit fell 54 percent to 601 million euros, missing analysts’ estimates, on costs tied to the acquisitions of Deutsche Postbank AG and Sal. Oppenheim Group and changes at the corporate and investment bank, the company said today. Revenue climbed 34 percent to 7.43 billion euros, beating projections, while non-interest expenses increased by 50 percent to 6.31 billion euros.

Rising expenses included acquisition-related costs of 750 million euros and higher severance payments, the lender said.

“We expect that Deutsche Bank is doing its best to cut costs in the investment bank to prepare for a harsher operating environment in the years to come,” Peter Thorne, a London-based analyst at Helvea Ltd., said in a Feb. 1 note. The fixed income, currencies and commodities business “for structural and regulatory reasons is in decline at the moment and the smart banks are adjusting before rather than after,” he said.

Postbank, Sal. Oppenheim

Deutsche Bank, led by Chief Executive Officer Josef Ackermann, 62, bought consumer lender Postbank and private-wealth manager Sal. Oppenheim last year to reduce dependence on investment banking. The company today reiterated a target to double pretax profit at its operating businesses to 10 billion euros this year from 2009 levels.

Analysts remain skeptical Deutsche Bank can reach the 10 billion-euro goal and forecast 2011 pretax profit of 8.4 billion euros, according to data compiled by Bloomberg.

“Naturally, we are well aware that we will again have many challenges to face and imponderables to consider this year,” Ackermann said in a speech in Frankfurt today. “But one thing is certain: Barring unforeseen major obstacles, we will be able to build on last year’s hard work and draw on the momentum from our successes to achieve our target.”

Risks include regulation, slowing global economic growth, the sovereign-debt crisis, geopolitical risks, rising energy and commodity prices as well as overheating in some emerging-market economies, according to Ackermann.


Deutsche Bank plans to pay a dividend of 75 cents for 2010, unchanged from the previous year, with the CEO saying the firm will maintain its “disciplined capital management” and “pay an appropriate dividend.” He also said he sees “significant upside potential” in the lender’s share price.

Deutsche Bank’s Tier 1 capital ratio, a measure of financial strength, was 12.3 percent at the end of December, compared with 12.6 percent at the end of 2009. Regulators from 27 nations last year agreed to more than double capital requirements for banks to help avert future financial crises.

Fourth-quarter revenue from debt sales and trading gained 26 percent to 1.57 billion euros, helped by foreign-exchange and money markets revenue as well as writeups of 202 million euros, following year-earlier writedowns. Equities trading revenue rose 37 percent to 872 million euros.

Banker Pay

The company increased the total amount it set aside to pay its 15,943 corporate and investment banking employees for 2010 by 17 percent to 5.94 billion euros from a year earlier.

Pretax profit at the retail-banking unit, run by Rainer Neske, climbed almost fivefold to 222 million euros, helped by Postbank. The asset and wealth management unit posted a pretax loss of 36 million euros after a 325 million-euro profit in the year-earlier period. Earnings from transaction banking decreased 48 percent to 94 million euros.

Sal. Oppenheim may break even this year after restructuring and should contribute 100 million euros to 150 million euros in pretax profit from 2014, Ackermann said today.

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