Friday 24 March 2017

Deutsche Bank posts €1.21bn loss

Deutsche Bank rose as much as 2pc in Frankfurt trading after reporting a net loss of €1.21bn. Photo: Bloomberg News
Deutsche Bank rose as much as 2pc in Frankfurt trading after reporting a net loss of €1.21bn. Photo: Bloomberg News

Deutsche Bank, Germany’s biggest bank, reported a third-quarter loss that was smaller than estimated as higher profit at the investment bank cushioned a writedown on its Deutsche Postbank stake.

Deutsche Bank rose as much as 2pc in Frankfurt trading after reporting a net loss of €1.21bn, less than €1.52bn loss predicted by analysts. The Frankfurt-based bank said on September 21 it would book a €2.3bn charge related to Postbank.

Chief Executive Officer Josef Ackermann completed a record €10.2bn share sale this month to buy the rest of Bonn- based Postbank and meet stricter capital rules.

Earnings before tax at the investment bank, run by Anshu Jain, rose 12pc to €1.1bn, beating analysts’ estimates and outperforming UBS and Credit Suisse Group.

“Deutsche Bank’s investment-banking unit performed much better than competitors,” said Konrad Becker, a Munich-based analyst at Merck Finck & Co, who recommends buying the shares. “This helped cushion the overall loss on the Postbank charge.”

UBS, Switzerland’s biggest bank, reported a surprise third- quarter loss at its investment bank yesterday on a slump in trading. Credit Suisse, the No. 2 Swiss bank, posted a 74pc drop in profit as lower client activity curbed trading.

Postbank offer

Deutsche Bank rose 81 cents to €42 by 9:28am. The shares have fallen 6.8pc this year, compared with a 3.3pc drop in Bloomberg’s European Banking Index.

The results “again prove the robustness of our recalibrated business model despite the difficult ongoing macro- economic and market conditions,” said Ackermann, 62, in a statement.

Ackermann is building up his consumer-banking and asset- management operations to counterbalance the investment bank, where earnings are more vulnerable to financial market swings.

Since 2006, Deutsche Bank acquired Berliner Bank, Nuremberg- based Norisbank and private wealth manager Sal Oppenheim Group, as well as a 30pc stake in Postbank.

Deutsche Bank had to mark down that holding in Postbank before consolidating the company’s results with its own after the takeover. Net income excluding the Postbank charge amounted to €1.1bn, the bank said.

Investment bank

Deutsche Bank offered €25 a share in cash last month to Postbank’s outstanding shareholders. The purchase, which may cost an estimated €6.4bn if all shareholders accept the offer, would more than double Deutsche Bank’s retail clients to €24m and add about 1,100 branches.

Earnings at the retail-banking unit, run by Rainer Neske, 46, rose 64pc to a better-than-estimated €245m in the third quarter, the highest result since the collapse of Lehman Brothers in September 2008.

Sales and trading at the investment bank fell 4pc in the quarter, less than at UBS and Credit Suisse.

Revenue from debt and other products increased 5pc to €2.24bn, helped by a rebound in September and foreign exchange.

Equity trading revenue slipped about 25pc to €650m, as client activity “remained muted” and Deutsche Bank exited “dedicated equity proprietary trading,” the bank said.

Goldman Sachs, Citigroup, JPMorgan and Morgan Stanley, all based in New York, as well as Charlotte, North Carolina-based Bank of America on average reported a 24pc decline in trading revenue in the third quarter from a year earlier, data compiled by Bloomberg show.

Capital rules

Compensation and benefits Deutsche Bank’s corporate and investment bank rose 9pc to €4.62bn in the first nine months of the year, the company reported.

The asset and wealth management unit posted pretax profit of €78m, down from €134m in the year- earlier period. Profit from transaction banking increased 6pc to €214m.

Deutsche Bank reiterated today that it aims to double pretax profit at its operating businesses to €10bn by 2011 from 2009 levels, helped by gains in investment banking, Asia and consumer lending.

Regulators from 27 nations last month more than doubled capital requirements for banks to avert future financial crises.

Deutsche Bank expects to meet higher standards planned for 2019 as early as the beginning of 2013, Ackermann said today.

The bank’s Tier 1 capital ratio, a measure of financial strength, totaled 11.5pc at the end of September, compared with 11.3pc at the end of the second quarter. The ratio doesn’t include the share sale.

Bloomberg

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