DealBook: Deutsche Bank Earnings Beat Expectations

Joerg Carstensen/European Pressphoto AgencyJosef Ackermann, the chief of Deutsche Bank.

Deutsche Bank, the largest German lender, on Tuesday reported third-quarter profit that was above expectations, as improvement in its consumer banking business helped offset a plunge in trading revenue that the bank blamed on the European sovereign debt crisis.

The bank said profit in the three months ended Sept. 30 was 777 million euros ($1.1 billion), after a loss of 1.2 billion euros in the period a year earlier. Analysts surveyed by Reuters had expected a net profit of 400 million euros.

But pretax profit in the corporate banking and securities division, which includes the investment bank, plunged to 70 million euros in the quarter from 1.1 billion euros a year earlier, the bank said.

“During the third quarter, the operating environment was more difficult than at any time since the end of 2008, driven by a deteriorating macroeconomic outlook, and significant financial market turbulence,” Josef Ackermann, the chief executive of Deutsche Bank, said in a statement. “Our performance was, inevitably, impacted by this environment.”

He said the bank had taken steps to reduce risk in investment banking, and put more emphasis on selling banking services to consumers.

Banks in Europe are under pressure to prepare themselves for the likelihood that Greece will default on its government bonds. Deutsche Bank, which reported a loss of 185 million euros related to holdings of Greek bonds in the quarter, is among institutions that may need to raise more capital.

The bank said its core Tier 1 equity, a measure of its ability to withstand financial shocks, was 10.1 percent at the end of the quarter, down from 10.2 percent at the end of the second quarter. European regulators are expected to push banks to raise the ratio to 9 percent by June at the latest.

While Deutsche Bank is above that level, it might still face market pressure to exceed the minimum by a more comfortable margin.

The bank could increase its capital ratio by selling new shares or, more likely, by retaining profit instead of paying it out to shareholders. The bank can also sell assets to raise the ratio of reserves to money at risk.

Article source: http://dealbook.nytimes.com/2011/10/25/deutsche-bank-earnings-beat-expectations/?partner=rss&emc=rss