DealBook: Deutsche Bank Posts $795 Million Profit in Third Quarter

Ralph Orlowski/Getty ImagesThe headquarters of Deutsche Bank in Frankfurt, Germany, under construction in 2009.

Deutsche Bank, Germany’s largest lender, said on Tuesday that profit in the third quarter was essentially flat, as a surge in investment banking revenue offset costs related to the bank’s legal problems and a cost-cutting program.

Net profit in the three months ended Sept. 30 fell to 755 million euros ($795 million) from 777 million euros in the period a year earlier, the bank said. Revenue rose 18 percent, to 8.7 billion euros. The bank reported a sharp recovery in its investment banking unit, which had been battered by the euro zone crisis and regulatory pressure to reduce risk.

Revenue in the investment banking unit rose 67 percent, to 2.5 billion euros, as customers increased trading activity, the bank said.

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Anshu Jain and Jürgen Fitschen, who share chief executive duties at the bank, said in a news release that the environment for banks was still unsettled.

“In the near term, the macro environment remains uncertain, and we will maintain a cautious and risk-focused approach,” they said.

Like most of its peers, Deutsche Bank has been trying to cope with market turmoil caused by the euro zone debt crisis at the same time regulators are putting pressure on European lenders with large investment banking operations.

Proposed European Union rules would compel banks to isolate their retail and lending businesses from risks created by investment banking. Deutsche Bank, which has often earned much of its profit from investment banking, could be among the those most affected if the rules go into force, some analysts say.

The bank, however, also appeared to benefit from reduced tensions in the euro zone in recent months. Fear of a breakup of the euro zone has eased after the European Central Bank said it would buy bonds of countries like Spain, if necessary, to keep their borrowing costs under control.

Deutsche Bank is facing legal proceedings related to allegations of unethical or illegal behavior in recent years. It is among the banks accused of manipulating the London interbank offered rate, or Libor, which is used to set interest rates on trillions of dollars of financial contracts worldwide.

Expenses related to litigation cut profit by 289 million euros in the quarter, Deutsche Bank said. Costs related to a restructuring program, which is intended to make the bank more efficient and less complex, subtracted another 276 million euros.

In September, Mr. Jain and Mr. Fitschen outlined an overhaul of the bank that would include lower profit targets, bigger capital buffers and smaller bonuses for top executives.

Article source: http://dealbook.nytimes.com/2012/10/30/deutsche-bank-records-795-million-profit-in-third-quarter/?partner=rss&emc=rss