Frankfurt: Deutsche Bank’s fourth-quarter profit missed estimates sharply, raising questions about the costs of restructuring the investment bank and the integration of Deutsche Postbank and Sal. Oppenheim.
Germany’s flagship lender said fourth-quarter revenues jumped by about a third but blamed the first-time consolidation of retail bank Deutsche Postbank and wealth manager Sal. Oppenheim as well as investments to restructure the corporate and investment bank for a decline in pretax profit.
The Frankfurt-based bank gained majority control of Deutsche Postbank, Germany’s largest retail lender by clients, in November and took over wealth manager Sal. Oppenheim in March.
Analysts said they were surprised at the top-line strength and would wait to pass judgment until Deutsche Bank publishes full quarterly results on Thursday.
“We would be wary of making a premature bearish judgment on these headline figures, noting buoyant January capital market trends, robust fourth-quarter revenues and recent upbeat comments from CEO (Josef) Ackermann,” analysts at Keefe, Bruyette & Woods said in a note on Tuesday.
In October, Deutsche Bank had said it was “optimistic” about business for the rest of the year, after posting resilient profit from investment banking in the third quarter, bucking a weaker trend set by some rivals.
Quarterly pretax profit fell to about €700 million ($960.3 million) from €756 million a year earlier, undershooting the €1.29 billion average estimate in a Reuters poll.
In a statement released late on Monday, Deutsche said costs to “realign the bank” caused non-interest expenses to rise to 6.3 billion euros in the fourth quarter, up from €4.2 billion in the year-earlier period.
Earlier this month US banks showed signs of weaker investment banking activity as Wall Street powerhouse Goldman Sachs suffered a year-end slump in trading revenue as worries about European sovereign debt and rising US Treasury yields kept investors on the sidelines.
Although Deutsche Bank is relatively exposed to fixed income weakness, the bank said quarterly net revenues rose to about €7.4 billion from €5.5 billion in the year-earlier period. “Post US investment banks’ reporting season, where FICC (fixed income, commodities and currencies) revenues featured as a key weakness, we are surprised at the apparent top-line resilience at Deutsche Bank,” Goldman Sachs analysts said in a note.