Deutsche Bank back in black

Deutsche Bank back in black
By James Wilson in Frankfurt
Copyright The Financial Times Limited 2009
Published: April 28 2009 07:51 | Last updated: April 28 2009 13:30
http://www.ft.com/cms/s/0/a0a53386-33bf-11de-83af-00144feabdc0.html


Deutsche Bank on Tuesday said it had bounced back into profit in the first three months of the year, following many of its global investment banking rivals in taking advantage of a sharp upturn in conditions after a disastrous last quarter of 2008.

Better trading for many of Deutsche’s most important debt businesses helped it lift net income to €1.2bn ($1.5bn), which was above analysts’ expectations and compares with a net loss of €141m in the same period of 2008. In the prior quarter – when Deutsche’s trading positions went badly wrong in the wake of Lehman Brothers’ collapse – the bank lost €4.8bn.

Pre-tax return on equity was 25 per cent, the bank said – once again meeting its pre-crisis target.

Josef Ackermann, chief executive, said there were still “challenges, but also opportunities, in our business environment” and said Deutsche had the “strategic autonomy to act”. Deutsche is one of the few banks that has not had direct government help during the financial crisis.

The results were announced hours after Germany’s largest bank said Mr Ackermann would stay on as chief executive for a further three years, until 2013.

“This was a key quarter for Deutsche Bank,” said Mr Ackermann. “Once again we demonstrated our strength, as we have consistently throughout this crisis. But in this quarter, we also proved our earnings power.”

Deutsche’s corporate and investment bank division – source of most of its profits during banking’s boom years – saw net revenues rise to €4.9bn compared with €1.5bn in the first quarter of 2008. However, revenues fell from €2.5bn to €1.9bn for Deutsche’s private client and asset management businesses

As expected, the overall better performance was helped by foreign exchange, money market and interest rate trading, although equity trading revenues fell. Origination revenues rose because of the non-recurrence of leveraged loan writedowns and the buoyant first quarter market for investment grade debt issuance.

Deutsche still announced writedowns of €1bn for the quarter, most of it in provisions related to monoline insurers. The first quarter of last year produced €1.4bn of writedowns. Revenues after the writedowns were €7.2bn. This figure also excludes a €500m impairment that recognises Deutsche’s investment in the Cosmopolitan, a Las Vegas resort and casino scheme that went into foreclosure last year.

Provisions for credit losses were €526m compared with €114m in the first quarter of 2008.

Shares in Deutsche Bank were €2.91 or 6.7 per cent lower at €40.35 in afternoon Frankfurt trading.

Mr Ackermann said Deutsche would “seize opportunities to strengthen our platform... in the first quarter we made substantial progress in implementing these strategies.” The bank has been aggressive in hiring staff from other banks.

Deutsche’s tier 1 capital ratio, a key measure of balance sheet, improved slightly to 10.2 per cent and therefore remained above its 10 per cent target. Excluding so-called “hybrid” capital, the ratio is 7.1 per cent.