Newspaper article International Herald Tribune

Deutsche Bank Benefits from Easing of Euro Crisis

Newspaper article International Herald Tribune

Deutsche Bank Benefits from Easing of Euro Crisis

Article excerpt

The bank reported earnings Tuesday that were better than expected, illustrating how lenders were beginning to benefit from the ebbing of tension in the euro zone.

Deutsche Bank reported earnings Tuesday that were better than expected, illustrating how lenders were beginning to benefit from the ebbing of tension in the euro zone.

But the report also provided a reminder that banks continued to struggle with the legacy of the financial crisis and pressure from regulators.

Deutsche Bank, the largest German lender, said profit slipped 3 percent in the third quarter, to EUR 755 million, or $979 million, as a comeback in investment banking revenue offset costs related to the bank's legal problems and a restructuring program.

The bank's stock was up almost 6 percent in late Frankfurt trading, in part because Stefan Krause, the bank's chief financial officer, said some of the decline in profit reflected accounting rules and would be recouped in future quarters.

But during a conference call with analysts, Mr. Krause had to fend off suggestions that Deutsche Bank carried more risk than other European banks and was vulnerable to proposed regulations that would curtail profitable but risky businesses.

The bank's relatively high dependence on borrowed money to operate "is the wrong indicator to look at," Mr. Krause said. "We are quite satisfied with our third-quarter results."

Overall revenue in the three months ended Sept. 30 rose 18 percent, to EUR 8.7 billion. Revenue in corporate banking and securities, the investment banking unit, rose 67 percent, to EUR 2.5 billion, as customers stepped up trading in stocks, bonds and other securities.

That was a reversal from the previous quarters when Deutsche Bank clients avoided volatile financial markets, cutting into the fees that the bank earns from trades.

Deutsche Bank also recorded gains in other areas, including the unit that serves private and business customers. That business, which includes the Postbank network serving individual depositors, increased pretax profit 59 percent in the quarter, to EUR 492 million.

Fear of a breakup of the euro zone has eased after the European Central Bank said in September that it was willing to buy bonds of countries like Spain, if necessary, to keep their borrowing costs under control. That has encouraged investors to return to markets, and it has benefited banks.

Anshu Jain and Jurgen Fitschen, who share chief executive duties at the bank, warned in a statement that the economic environment remained unsettled.

"We will maintain a cautious and risk-focused approach," they said.

Deutsche Bank has built up the size of its capital reserves, but still has a thinner cushion than other large banks, analysts said. "The key issue remains weak capital," analysts at J. …

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