Feb. 4 (Bloomberg) -- Deutsche Bank AG, Germany’s biggest bank, posted a fourth straight quarterly profit, buoyed by a tax gain, a year after reporting a record loss.
The Frankfurt-based bank had net income of 1.3 billion euros ($1.8 billion), or 2 euros a share, in the fourth quarter after a loss of 4.8 billion euros, or 8.71 euros, a year earlier, it said in a statement today. Earnings were bolstered by a tax benefit of 554 million euros.
Deutsche Bank, like New York-based Goldman Sachs Group Inc. and JPMorgan Chase & Co., recorded a rebound in profit last year after emerging from the worst financial crisis since the Great Depression. Earnings at Deutsche Bank’s investment-banking unit lagged behind analysts’ estimates in the fourth quarter after debt and equity trading fell from the previous three months.
While Deutsche Bank reported “strong” net profit, “weakness is driven by the investment bank,” Citigroup Inc. analysts led by Kinner Lakhani said in a note to investors today. Citigroup rates Deutsche Bank “hold/high risk.”
Deutsche Bank fell 3 cents to 45.79 euros by noon in Frankfurt trading, after rising as much as 2 percent. The stock has gained 118 percent over the last 12 months, compared with a 52 percent gain in the 52-company Bloomberg Europe Banks and Financial Services Index.
The bank plans a dividend of 75 cents a share for 2009, compared to 50 cents for 2008 and 4.50 euros for 2007.
‘Trend to Recovery’
“Looking forward, we see a clear trend to recovery, and stabilization of financial markets, although the effects of the recent crisis will take time to work through,” Chief Executive Officer Josef Ackermann said in a statement.
The bank made a “promising start” to 2010, he said at the bank’s annual press conference in Frankfurt.
JPMorgan doubled earnings in 2009 to $11.7 billion, while profit at Goldman Sachs rose by more than five times to $13.4 billion. Deutsche Bank earned 4.97 billion euros last year, compared with a record loss of 3.84 billion euros in 2008.
The German company reported fourth-quarter pretax profit of 756 million euros, missing the 945 million-euro estimate of analysts surveyed by Bloomberg. The figure included 225 million euros in costs related to the U.K. bonus tax, the bank said.
“Pretax profit was clearly below expectations due to weak trading income,” said DZ Bank AG analyst Matthias Duerr. “The strong net income was due to a one-off positive tax effect.”
Investment Bank
Deutsche Bank’s Tier 1 capital ratio, a key measure of financial strength, was 12.6 percent, up from 10.1 percent at the end of 2008. The so-called core Tier 1 ratio, which excludes hybrid instruments, stood at 8.7 percent, compared with 7 percent a year earlier.
The investment bank, led by Anshu Jain, 47, and Michael Cohrs, 53, reported fourth-quarter pretax profit of 397 million euros, after a record loss in the year-earlier period. Analysts estimated earnings of 619 million euros at the unit.
The company’s global markets business, run by Jain, had trading income from debt and other products of 1.28 billion euros, compared with the 1.6 billion-euro estimate of analysts. Equity trading generated 637 million euros in revenue, missing the analyst estimate of 814 million euros.
Ackermann told reporters at a press conference in Frankfurt today that trading developed “very well” in January, and that the fourth-quarter slowdown was temporary.
Compensation
The rebound in profit at some of the world’s biggest banks a year after governments and central banks rescued the financial system has reignited a debate over pay. Deutsche Bank set aside 357,000 euros last year in compensation and benefits for each employee at the corporate and investment bank, which includes the securities business and transaction banking. Total compensation at the unit amounted to 5.06 billion euros.
Ackermann said today that self-regulation on bonus payments within the banking industry would be preferable to government legislation.
Deutsche Bank’s asset and wealth management business had pretax earnings of 326 million euros, after a loss of 860 million euros in the year-earlier period. Earnings at the consumer bank fell to 47 million euros from 51 million euros a year earlier.
Ackermann, 61, is trying to reduce the company’s dependence on investment banking, which accounts for more than two-thirds of group profit, by making acquisitions.
Acquisitions
He agreed in October to buy Sal. Oppenheim Group, Germany’s biggest independent private bank, and ABN Amro Holding NV’s commercial-banking operations in the Netherlands. The bank also purchased a stake in German retail lender Deutsche Postbank AG and has an option to increase the holding. The company isn’t under pressure to buy more shares in Postbank, Ackermann said.
U.S. President Barack Obama last month surprised bankers by throwing his support behind a plan from former Federal Reserve Chairman Paul Volcker that would impose new rules on bank size and bar banks from owning or sponsoring hedge funds and private- equity funds, as well as engaging in so-called proprietary trading that’s not related to clients.
Ackermann said that the plan wouldn’t have a “dramatic” effect on Deutsche Bank, estimating the potential impact at less than 2 percent of revenue. He said last week at the World Economic Forum in Davos, Switzerland that Deutsche Bank has exited “the bulk” of activities targeted in the proposal. He also voiced opposition to breaking up large banks.
To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Bettinga in Frankfurt at jbettinga@bloomberg.net.
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