FRANKFURT Deutsche Bank (DBKGn.DE) warned on
Wednesday its biggest money spinner, investment banking, would
stay sluggish after a global market crunch pushed the business
into the red for first time in half a decade.
Even though the investment bank said the fourth quarter
would flag, investors were pleased to escape any nasty
surprises in the bank's results.
Its shares rose 3.6 percent to 91.97 euros by 0915 GMT
compared with a 0.7 percent rise in the DJ Stoxx European
banking index .SX7P.
The investment bank made a pretax loss of 179 million euros
($258 million) in the third quarter and it said fourth-quarter
revenues would be squeezed "significantly lower than the
all-time highs reached recently" as markets stay choppy.
The absence of shock news was in stark contrast to some
rivals. Earlier in the week, UBS UBSN.VX became the second
global player to report a third-quarter loss after Merrill
Lynch MER.N unveiled an unexpected $8.4 billion in
"They did a better job than Merrill Lynch," said Andreas
Plaesier, an analyst with MM Warburg. But he added: "I assume
that the financial crisis will also hit investment banking in
the first quarter of 2008."
The Frankfurt-based lender made an overall pretax profit of
1.4 billion euros in the quarter, thanks to windfalls from the
sale of company stakes as well as offices on Wall Street.
This result, although a fifth lower than a year earlier, is
better than Deutsche Bank had predicted a month ago, when it
told investors to expect a roughly 1.2 billion euro profit.
"Investors are relieved that Deutsche Bank does not have
any skeletons in the closet," said one trader.
Unveiling the damage inflicted by weeks of turmoil in debt
markets combined with tightening credit, Deutsche Bank said
revenues in its corporate and investment bank dipped by more
than a half to 1.9 billion euros in the third quarter.
TRADING BUSINESS LOSS
Its prized trading business, a goldmine for the bank in the
past but as unpredictable as the financial markets in which it
trades, made a loss of more than 800 million euros.
Buying and selling debt products was badly affected by
difficult market conditions. Revenues there dipped by more than
two thirds to less than 600 million euros.
The third-quarter results were helped by a lower wage bill
because Deutsche Bank will pay lower staff bonuses following
the recent rocky patch, Deutsche Bank Chief Financial Officer
Anthony di Iorio told analysts.
"October started out very positively," di Iorio said,
though he warned that it was too early to call the full-quarter
Societe Generale analyst Alan Webborn said there was still
a question mark over the future.
"Whatever they have done, they have flattered those
results. There is no disclosure," Webborn said.
"It's all very well to say that the fourth quarter started
well. But it is getting worse," he added.
Deutsche Bank, whose shares have lost more than 12 percent
so far this year, said it took one-time hits from the crisis
triggered by the subprime mortgage troubles.
Nonetheless, Chief Executive Josef Ackermann stood by its
goal of a pretax profit of 8.4 billion euros next year, adding,
the proviso that markets needed to remain "normal." (Additional
reporting by Jonathan Gould and Patricia Nann)