Frankfurt: Deutsche Bank’s quarterly earnings rebounded from record losses, but a one-off tax gain masked weaker investment banking profits as tighter regulations cloud this year’s outlook for itself and European rivals.
Shares in Deutsche fell 0.6% but outperformed the banking sector after it reported a 1.3 billion euro ($1.8 billion) net profit in the fourth quarter, beating market forecasts of 770 million euros and dampening speculation about a possible capital increase.
Analysts viewed the results as a mixed bag.
The bottom-line figure was flattered by a €554 million tax gain and the pretax profit of €397 million in corporate banking and securities showed investment banking was not as strong as in previous quarters.
“Pretax profit was clearly weak due to weak trading income,” DZ Bank analyst Matthias Duerr said in a note, adding that a stronger capital base had diminished chances of Deutsche needing a capital increase.
Chief executive Josef Ackermann acknowledged that the crisis had rattled the flagship lender.
“Looking forward we see a clear trend to recovery and stabilisation of financial markets, although the effects of the recent crisis will take time to work through,” Ackermann said in a statement.
Ackermann added that Deutsche was well placed for the challenges and opportunities of 2010, as the bank revealed its tier 1 capital ratio had improved to 12.6% as it prepares to absorb acquisitions such as wealth manager Sal. Oppenheim.
Pretax income rose to €756 million in the fourth quarter from a €6.2 billion loss a year earlier and versus analysts’ forecasts of €1.06 billion profit in a Reuters poll.
Deutsche was the first major bank to put a figure on the costs of the UK bonus tax, booking a €225 million one-off expense in the latest quarter. The Frankfurt-based lender’s compensation ratio rose to 42.5% from 39.3% in the third quarter.
Provisions for credit losses of €560 million in the fourth quarter were below analyst expectations and €591 million a year earlier, but up from €544 million in the third quarter.
In 2009 Deutsche Bank posted a pretax profit of €5.2 billion and a net profit of €5 billion, recovering from a pretax loss of €5.7 billion and net loss of €4.8 billion in 2008, Deutsche’s worst year for earnings.
However, that was enough for Deutsche to decide to award investors with a higher dividend of €0.75 per share, up from €0.5 in 2008.
Exposure to real estate and customer loans ate in to profits at Spanish rival BBVA, while US rival Goldman Sachs posted record profits on the back of an investment banking windfall last month.