Deutsche Bank Profit Tops Analyst Estimates on Trading Rebound
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By Aaron Kirchfeld and Jann Bettinga
April 28 (Bloomberg) -- Deutsche Bank AG, Germany’s biggest bank, returned to profit in the first quarter, beating analysts’ estimates as a recovery in credit markets led to a rebound in trading.
Net income was 1.19 billion euros ($1.55 billion), compared with a loss of 131 million euros a year earlier, the Frankfurt- based bank said in a statement on the company’s Web site today. The median estimate of 13 analysts surveyed by Bloomberg called for a profit of 773 million euros.
Chief Executive Officer Josef Ackermann agreed to extend his contract by three years after leading the bank back to profit, the company said yesterday. Deutsche Bank, which posted its first annual loss in more than 50 years in 2008, profited from record sales of corporate bonds and a thaw in credit markets in the first quarter.
“Bond sales propelled earnings at Deutsche Bank and its competitors,” said Daniel Hupfer of M.M. Warburg in Hamburg, who helps manage about 31 billion euros including Deutsche Bank stock. “But we’re not through the financial crisis yet. Risks remain in banks’ books and Deutsche Bank could face further writedowns.”
Deutsche Bank rose 55 percent so far this year, the third- biggest gainer in the Bloomberg index of 65 European banks, following a 69 percent slump in the stock last year. The company has a market value of 26.9 billion euros.
Markets Thaw
The freeze in global credit markets showed signs of a thaw in the first quarter. Sales of corporate bonds surged to a record 387 billion euros, double the amount raised in the same period in 2008, according to data compiled by Bloomberg. The Libor-OIS spread, a gauge of the reluctance of banks to lend, fell to 97 basis points on March 31 from 121 basis points at the end of 2008.
Credit Suisse Group AG, Goldman Sachs Group Inc., Citigroup Inc. and JPMorgan Chase & Co. announced first-quarter results that beat analysts’ forecasts as trading revenue surged.
Deutsche Bank said late yesterday that Ackermann, 61, agreed to a request from the bank’s supervisory board to remain CEO until the annual general meeting in 2013. The Swiss-born executive, who helped Deutsche Bank skirt the worst of the U.S. subprime mortgage crash and resist taking government aid, had been scheduled to step down at the AGM in May 2010.
Return to Profitability
Ackermann said on March 24 the bank had a “good start” to the year after scaling back risky businesses and shedding assets including leveraged loans and commercial real estate. The company said at the time it expected to return to profitability this year if the global economy, financial markets, legal and regulatory environment and competitive situation develop as the bank foresaw.
Deutsche Bank’s investment-banking unit, led by Anshu Jain and Michael Cohrs, reported a 1.32 billion-euro pretax profit, helped by trading of bonds, currencies and commodities. The division, known as corporate banking and securities, posted a record pretax loss of 5.77 billion euros in the last three months of 2008 as the worst financial crisis since the Great Depression pummeled bond and stock trading.
The German bank has said it aims to gain market share in businesses including equities and commodities trading and takeover advisory. The company expects to benefit as state- supported competitors reorganize.
The world’s biggest financial companies have booked more than $1.3 trillion in writedowns and credit-related losses since the beginning of the U.S. subprime mortgage crisis in 2007, forcing them to raise $1.1 trillion euros in capital from government and investors, according to Bloomberg data.
Deutsche Bank has repeatedly said it doesn’t need to raise capital from the state or investors and has no plan to tap Germany’s 480 billion-euro bank-rescue fund. Commerzbank AG, Germany’s second-largest bank, is getting 18.2 billion euros from the state fund.
To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Bettinga in Frankfurt at jbettinga@bloomberg.net
Last Updated: April 28, 2009 01:29 EDT
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