Magazine article American Banker

Still Digesting BT, Deutsche Reports 1.3% Rise in Profits

Magazine article American Banker

Still Digesting BT, Deutsche Reports 1.3% Rise in Profits

Article excerpt

Deutsche Bank AG, the world's largest bank, said Tuesday that earnings rose a slender 1.3% during the third quarter as it swallowed increased administrative costs from its June acquisition of Bankers Trust Corp.

The $891 billion-asset company reported net income of $82.2 million, a slight increase from $81.2 million a year earlier.

Helped by advances in its securities and asset management business, commissions were the biggest contributor to net income, increasing 66.5% year-over-year, to $2.2 billion. Profits from trading rose to $1.13 billion, from a loss of $122.8 million last year.

Investment banking bonus payments and other costs from integrating Bankers Trust offset those advances, however, and expenses jumped 76%, to $4.3 billion. Excluding costs from retention packages for Bankers Trust employees, the German bank's cost/income ratio rose to 83% in the quarter, from 74.5% in the second quarter -- a troubling sign, according to some analysts.

"If this is what the bank does in a bull market, what will it do in a bear market?" said Evangelos Kavouriadis, a banking analyst at Sanford C. Bernstein & Co. Mr. Kavouriadis has a "hold" rating on the stock.

The results reflect Deutsche's strategy of being both a pan-European and a global investment bank, which is an expensive undertaking, he added. "The problem is, to build global investment banking you have to pay a lot of premiums, and you don't get a great return on your investment," Mr. Kavouriadis said.

Earnings from Bankers Trust units were consolidated with those of Deutsche Bank, making it difficult to gauge how much the old U. …

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