Deutsche Bank AG, Europe’s biggest bank, said third-quarter profit climbed after a rally in bond and stock markets brought a surge in trading revenue. The shares jumped.
Net income unexpectedly rose an annual 3 percent to 747 million euros ($964 million) in the three months through September, the Frankfurt-based company said in a statement today. That beat all seven analyst estimates compiled by Bloomberg and the 563.9 million-euro average.
Deutsche Bank is seeking to increase its share of income from investment banking among the world’s largest banks as rivals such as UBS AG scale back their operations. European Central Bank President Mario Draghi buoyed markets and spurred sales of securities in the third quarter by pledging in August to conduct bond purchases to prop up some euro-region countries.
“It was a good quarter and the stock is also benefitting from plans UBS announced today -- Deutsche Bank can win market share as competitors retrench,” Philipp Haessler, an Equinet AG analyst in Frankfurt who recommends investors buy the stock, said in a telephone interview.
Deutsche Bank advanced 4 percent to 34.62 euros at 12:51 p.m., gaining the most in two weeks. The share has increased 18 percent this year.
UBS, Switzerland’s biggest bank, announced plans for another 10,000 job cuts today as it scaled back on investment banking and focused on wealth management. It will reduce staff by more than 15 percent to about 54,000 over three years to help save an additional 3.4 billion Swiss francs ($3.6 billion), the Zurich-based bank said today.
Revenue from trading in bonds and other products at Deutsche Bank jumped an annual 67 percent in the third quarter to 2.5 billion euros. That beat the average estimate of six analysts of 2 billion euros. Revenue from equities trading rose 67 percent to 642 million euros.
The lender has completed about 1,200 of the 1,500 job cuts at its investment bank and related areas as of the end of September, Stefan Krause, the company’s chief financial officer, said today on a conference call with analysts. It will wrap up the majority of its remaining headcount reduction by the end of the year, he said.
The bank, which is cutting a total of 1,993 jobs, has said it will incur 4 billion euros in costs to achieve annual targeted savings of 4.5 billion euros by 2015.
Banks across Europe are firing staff and reviewing businesses as the sovereign-debt crisis reduces trading and rising capital demands weigh on profitability.
The company, which earned 45 percent of its revenue from investment banking last year, took 320 million euros in restructuring charges in the third quarter out of 600 million euros slated for the second half, according to the statement.
Deutsche Bank said today that it has received requests for information from regulatory agencies concerning its processing of U.S. dollar payment orders through U.S. institutions for parties from countries subject to U.S. embargo laws. The bank is cooperating with the requests, according to the statement.
Expenses from litigation rose to 289 million euros in the third quarter from 180 million in the same period a year earlier, the company’s filings show. Deutsche Bank left its estimate for potential litigation losses for which it hasn’t set aside provisions at 2.5 billion euros at the end of September, unchanged from three months earlier.
The company is among four European banks being investigated by U.S. authorities for alleged violations involving oil trading and Iran, an attorney with knowledge of the matter said in September on condition of anonymity.
Lawsuits will occupy the company for “quite a while,” Krause said today.
Deutsche Bank’s core tier 1 capital ratio climbed 57 basis points, or 0.57 percentage point, to 10.7 percent in September from the previous quarter, according to the earnings statement. That means “we are on track to achieve our Basel III capital ambitions,” Juergen Fitschen and Anshu Jain, co-chief executive officers, said in an e-mail today.
The German bank was the least capitalized of Europe’s four biggest investment banks at the end of June, data compiled by Bloomberg Industries show. The 10.7 percent ratio may still place Deutsche Bank last in that ranking. Barclays Plc, which had a ratio of 10.9 percent at the end of June, reports third-quarter earnings tomorrow.
Deutsche Bank’s capital levels are still “weak” and the gap with its competitors is widening, JPMorgan Chase & Co. analysts Kian Abouhossein and Amit Ranjan wrote in an e-mailed report.
The “probability of Deutsche Bank issuing new capital through an indirect capital raise of issuing performance related shares is increasing,” the London-based analysts wrote.
Net interest income was 3.72 billion euros in the third quarter compared with 4.3 billion euros a year ago and an average estimate among seven analysts of 4 billion euros.
German lenders face “intense competition and low interest rates are causing margin pressure,” Moody’s Investors Service said on Oct. 19.
Deutsche Bank’s pretax profit at its private and business clients unit rose to 492 million euros in the third quarter from 310 million euros a year ago on gains from asset sales. That beat the 329 million-euro average estimate of nine analysts surveyed by Bloomberg.