Deutsche Bank earnings set record amid turmoil

Frankfurt: Deutsche Bank's investment bank posted forecast-beating record quarterly earnings, adding credibility to the lender's ambitious targets even as Wall Street faces a regulatory and legal hurricane.

Deutsche's corporate banking and securities division, which posted 2.59 billion euros (Dh12.68 billion) in pretax profit, accounted for the lion's share of 2.79 billion euros in group pretax earnings, mirroring blowout gains at US peers like Morgan Stanley.

Analysts polled by Reuters had estimated that Germany's biggest lender would earn 1.99 billion euros in pretax profit in the quarter ended in March, a rise of almost 10 per cent from the year-earlier period.

Deutsche's earnings benefited from strong results in debt-trading and the absence of markdowns in areas such as leveraged loans, boosting the chances of 62-year-old Swiss Chief Executive Josef Ackermann to hit ambitious profit targets next year.

First impression

"The first impression is really good. Deutsche Bank is above consensus both before and after taxes. In addition, the loan loss provisions fell significantly, which is a very good sign," Merck Finck analyst Konrad Becker said.

Deutsche Bank shares had been indicated to open almost two per cent higher, but reversed early gains to trade 1.1 per cent lower at 54.76 euros by 0721 GMT.

"The economic environment clearly stabilised in the first quarter 2010, but is not without remaining vulnerability," Ackermann said in a statement.

Investment banks boosted earnings last year in part thanks to government measures including short-selling bans on financial stocks, looser collateral rules, and fiscal stimulus measures.

But the sector is in the crosshairs of politicians and regulators who want to curtail banks' risk-taking activities in a bid to make the financial system safer.

In its first quarter report, the bank said it faced a US class-action lawsuit over mortgage-related securities it helped arrange.

Frankfurt-based Deutsche Bank said its Tier 1 capital ratio slipped to 11.2 per cent at the end of March from 12.6 per cent at the end of 2009 as it absorbed acquisitions such as wealth manager Sal. Oppenheim.

Profit predictions