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Deutsche Bank reported higher profit than the forecasts

Deutsche Bank AG, the largest investment bank in Europe by revenue, said third-quarter profit that exceeded analysts' expectations. Cites the best user revenues from banking and asset management, the softening effect of the decline in investment banking. The net profit of Germany's biggest bank reached 725 million EUR (1 billion USD) after losing 1.21 billion EUR for the same period last year, when Deutsche Bank acquired Deutsche Postbank AG. Analysts expected profit of 343 million EUR. Earlier this month the Frankfurt-based Deutsche Bank lowered its forecast for annual profit and announced cuts of 500 jobs.
"The third quarter was very small for investment banks and perhaps will be the bottom. However, this depends on the outcome of the debt crisis", said Olaf Kayseri, an analyst at Landesbank Baden-Wuerttemberg in Mainz. "The key to Deutsche Bank is winning market share from its competitors, despite declining revenues". Since the beginning of the year the share price of Deutsche Bank has fallen by about 27%, which the company's market capitalization has fallen to 26 billion. For comparison, Europe Banks and Financial Services Index, tracking shares of 46 European financial institutions fell by 29%. Profits from consumer banking rose 27 percent to 310 million EUR, supported by Postbank, whose acquisition doubled clients of Deutsche Bank to about 29 million department management of capital, aided by the acquisition of Sal. Oppenheim, announced 100% rise in profit to 186 million EUR. The division of Investment Banking reported a decline in profit before tax to 70 million EUR from 1.1 billion EUR in the same period last year. This result was lower than analysts expected 89 million EUR. Profits suffered by the bank 310 million EUR from the VAT increase in Germany.
Deutsche Bank chief Josef Ackermann, who plans to retire in May, in early October said his company is more vulnerable to economic slowdown in Europe than some global competitors, including major U.S. banks. About 42% of bank revenues come from Europe, he said. "In the third quarter operating environment was more difficult than in any period since the end of 2008 due to deteriorating macroeconomic outlook and severe market turmoil", said Ackerman. "The strategic decision for recalibration of our investment bank, revenue growth of the classic bank operations, and strengthening capital and liquidity positions of the bank led to good results". On October 4th, the bank announced that 250 million written off the value of Greek assets, justifying its decision to decline in their market price. The decrease amounted to 46% of their nominal value. To reduce the dependency from Deutsche Bank investment banking, which in 2009 generated 71% of the bank's profit before tax, Ackerman relies on the acquisition of Postbank and Sal. Oppenheim Group. In 2013 this share is projected to fall to 60%.
The bank abandoned its original forecast of 10 billion EUR, operating profit before tax, citing lower than expected profits from investment banking. Profits from consumer banking were "significantly more than expected", says Ackerman. The capital adequacy of Deutsche Bank declined to 10.1% in the third quarter from 10.2% at the end of the second.