Deutsche Bank Q3 lifted by rebounding markets

Wednesday, 31 October 2012 00:46 - - {{hitsCtrl.values.hits}}

Reuters: Stronger investment banking income lifted Deutsche Bank’s pretax profit in the third quarter by 20% year-on-year and the bank raised its job cuts target for the division.

A big rise in debt trading revenues, mirroring improved performance at rivals, played to the German bank’s strength and helped offset higher credit loss provisions. The bank said these was partly due to efforts to reduce risk.

Deutsche Bank unveiled a strategic overhaul in September in a bid to cut costs and improve returns. It said on Tuesday it had increased its job loss target by nearly 100 to 1,993, and was well on its way to completing the layoffs by the year-end.

The bulk of the jobs will fall on the investment bank, where rivals have also been cutting deeply as economic woes in the euro zone hurt dealmaking and tougher regulation squeezes returns. Switzerland’s UBS on Tuesday unveiled plans to wind down its fixed income business and fire 10,000 bankers, in one of the most dramatic overhauls in the sector yet.

At Deutsche Bank, many of the cuts have fallen in the equities unit, a weak spot for many banks as trading volumes have waned. Revenues in this area also improved on last year, however, and were 67% up on the third quarter of 2012.

A move by the European Central Bank to pacify markets at the end of July helped fuel a debt issuance boom, boosting firms like Deutsche Bank with an improved month of trading in September. The bank said it sees a moderate positive development for the remainder of the year, though Co-Chief Executives Juergen Fitschen and Anshu Jain warned there were still risks ahead.

“In the near term, the macro environment remains uncertain, and we will maintain a cautious and risk-focused approach,” they said in a statement.

Deutsche Bank’s third-quarter pretax profit rose 20% to 1.1 billion euros, in line with analyst expectations, while third-quarter net income was stable at 755 million euros. In late September, Jain told investors the bank had seen a “very solid” performance in the third quarter and analysts forecast a pretax profit of 1.06 billion euros. Provisions for credit losses rose by 20% and the bank took a 276 million euros charge for restructuring.

The bank improved its core tier one ratio to 10.7%, mainly by shedding risky assets. At the end of the second quarter the core tier one ratio was 10.2%.

Its pre-tax return on equity, meanwhile, a key measure of profitability, stood at 7.9% in the third quarter, slightly up from 6.8% in the previous three months.