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Management will propose an unchanged dividend of 75 cents a share, Deutsche Bank chief financial officer Stefan Krause said on a call with analysts. Photo: Bloomberg
Management will propose an unchanged dividend of 75 cents a share, Deutsche Bank chief financial officer Stefan Krause said on a call with analysts. Photo: Bloomberg

Deutsche Bank beats estimates on trading, lower legal costs

Net income in fourth quarter was 438 million, compared with a loss of 1.36 billion a year ago and analysts' prediction an average 341 million loss

Frankfurt: Deutsche Bank AG swung to a profit after legal charges dropped and the investment bank posted fourth-quarter earnings that exceeded analysts’ estimates on higher trading revenue.

Net income was €438 million ($494 million), compared with a loss of €1.36 billion in the same period a year earlier, the company said on Thursday in Frankfurt. Nine analysts surveyed by Bloomberg predicted an average €341 million loss. The securities unit’s pretax profit almost quadrupled to €516 million in the period.

Deutsche Bank raised cash from investors last year to boost capital and bolster returns by seeking to expand the debt-trading business as rivals exit. Co-chief executive officers Anshu Jain and Juergen Fitschen are preparing a fresh strategy after legal costs and stricter regulation curbed profitability.

“It wasn’t quite as bad as people had feared," Neil Smith, an analyst with Bankhaus Lampe who recommends investors buy the shares, said by phone from Dusseldorf. “This is a good message because actually this is where they want to defend their market share."

Dividend, litigation

The shares rose as much as 2.9% and were 1.8% higher at €25.61 by 9.31am in Frankfurt on Thursday, paring the decline in the past 12 months to 27%.

Management will propose an unchanged dividend of 75 cents a share, chief financial officer Stefan Krause said on a call with analysts. Litigation costs were €207 million compared with €1.11 billion in the fourth quarter of 2013.

In the first quarter, “improved volatility and client activities in areas like foreign exchange, rates, and equities are driving stronger results in all our core trading businesses compared to last year", Jain said on a call with analysts.

Deutsche Bank’s revenue from trading debt and currencies rose 13% to €1.15 billion in the fourth quarter from a year before, the company said. That beat the €1.08 billion average estimate of eight analysts surveyed by Bloomberg.

The five largest US investment banks saw their combined income from the business drop 25% in the last three months of 2014 from the same period a year earlier, data compiled by Bloomberg Intelligence show. Deutsche Bank started from a lower level after losing market share in 2013.

Foreign exchange, credit solutions and residential mortgage-backed securities businesses drove the increase, while revenue from rates, flow credit and distressed products declined, Deutsche Bank said.

Equity trading

Income from equity trading soared an annual 35% to €728 million in the quarter, exceeding the €635 million estimate of analysts. Deutsche Bank said revenue from equity derivatives and its prime finance unit catering to hedge funds were “significantly higher".

The bank’s consumer unit, which includes small- and mid-sized business clients, saw its earnings slide 75% to €55 million after taking €330 million of charges related to loan processing fees in Germany. Profit at the transaction banking arm, which handles payments for companies, more than tripled to €265 million, while the money-management business recorded an 82% jump in profit to €365 million. Bloomberg

Shane Strowmatt in Frankfurt contributed to this story.

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