Germany’s largest bank by assets earned net income of €2.1bn ($3.1bn) in the first three months of the year. Pre-tax profits from operating businesses were €3.5bn, with a record quarterly contribution from retail banking and asset management offsetting a decline in pre-tax profits from the bank’s trading and investment banking arm.
Josef Ackermann, chief executive, said on Thursday he was confident the bank would reach a target of €10bn of annual pre-tax profits this year from its operating businesses.
“As encouraging as the magnitude of this quarter’s earnings is how we achieved these results – a broad based contribution that demonstrates the business and geographic diversity of our entire franchise,” Mr Ackermann said in a statement.
Analysts had expected Deutsche to report net income of about €1.8bn from the first quarter, traditionally the best for investment banks.
Deutsche has invested heavily over the 18 months to beef up its weaker retail and asset management operations, buying German rivals including Sal Oppenheim, a private bank and wealth manager, and Deutsche Postbank, the country’s biggest retail bank by customer numbers.
As a result, Deutsche’s pre-tax profits from private client and asset management divisions reached €978m compared with €184m in the same quarter a year ago. Deutsche said €221m of pre-tax profits related to Postbank and €236m to the German bank’s increased stake in China’s Hua Xia Bank.
Synergies from the Postbank deal were “greater than originally envisaged”, Deutsche said.
Within investment banking, Deutsche revealed a 4 per cent year-on-year decline in debt sales and trading revenues, saying many products felt the impact of continued sovereign risk concerns, unrest in the Middle East and the Japanese earthquake and nuclear power crisis. Equity sales and trading revenues were flat but dealmaking and advisory revenues increased 27 per cent, partly propelled by an upsurge in companies raising capital through initial public offerings.
Michael Rohr, an analyst at Silvia Quandt, said Deutsche’s investment banking performance was still strong in the light of record revenues a year ago and compared well with Swiss rivals UBS and Credit Suisse.
Deutsche also improved its core tier one capital ratio during the quarter from 8.7 per cent at the end of the year to 9.6 per cent. The ratio is a key measure of banks’ capital strength and will have to be at least 7 per cent from 2013, global regulators have agreed.
In the bank’s quarterly report Mr Ackermann said sentiment indicators in the US and the eurozone, especially Germany, had become “distinctly more optimistic”. But he said there was still a risk that events in Japan, the Middle East and northern Africa could damp optimism.
Mr Ackermann also said it was becoming clear that new rules for banks would be differently implemented across the world. “The regulatory and fiscal challenges will have a significant impact on our international competitiveness as a globally operating bank, but they will also create opportunities,” he said.
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