Deutsche Bank posts 4th quarter profit, following loss a year earlier, on improved trading

Deutsche Bank makes Q4 profit as trading picks up

FRANKFURT — Germany’s Deutsche Bank AG said Thursday that tax breaks in the U.S. and stronger trading revenue helped lift its net earnings to euro1.3 billion ($1.8 billion) in last year’s fourth quarter.

The quarterly profit, the bank’s fourth in a row, compared with a loss of euro4.8 billion in the final three months of 2008.

Deutsche Bank, based in Frankfurt and Germany’s biggest by assets, was buoyed by a euro554 million gain from tax benefits that arose from a decision to recognize deferred tax assets in the U.S. of some euro790 million.

Revenue rose to euro5.5 billion in the fourth quarter, compared with a negative euro853 million last year.

For the full year, the bank earned euro5 billion, reversing a loss of euro3.9 billion in 2008, when earnings were hit hard by the global economic crisis. Revenue nearly doubled to euro27.9 billion from euro13.6 billion

Despite the gain, the bank said that its loan losses edged higher to euro560 million, pushing its bad loan provisions for 2009 to a total euro2.6 billion.

The quarterly and annual results were bolstered by an increase in sales and trading revenues. They reached euro1.3 billion in the fourth quarter and totaled euro9.8 billion for the full year, compared with just euro116 million in 2008.

Deutsche Bank joined banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. in emerging from the global financial crisis with healthy profits, while other banks are still posting losses.

“Deutsche Bank achieved a great deal in 2009. We delivered very substantial profitability, while simultaneously reducing risk and balance sheet leverage,” Chief Executive Josef Ackermann said in a statement.

“We used these good results to bolster our capital base, and our capital ratios are stronger than ever.”

The bank’s Tier 1 capital ratio, a key barometer of financial health, stood at 12.6 percent for the year, up from 10.1 percent at the end of 2008.

Deutsche Bank also raised its dividend for 2009 to 75 euro cents from 50 euro cents the year before.

However, Ackermann said that the global economic crisis was still winding its way through the financial system and there was unlikely to be any quick recovery.

“Looking forward, we see a clear trend to recovery, and stabilization of financial markets, although the effects of the recent crisis will take time to work through,” he said.

Ackermann has acknowledged — most recently on the sidelines of the World Economic Forum in Davos last week — that the “regulatory framework of our industry will also likely see changes.”

Regulators from the world’s major developed countries told bankers in Davos that greater regulation was coming, including a bank tax and other tough new measures by individual countries, in a coordinated way, to prevent bankers from moving from one place to another to escape regulation.

Ackermann said Deutsche Bank had phased out its proprietary credit trading business and also was reducing trading in equity derivatives by 90 percent.

Shares of the bank were up 0.7 percent to euro46.05 in afternoon trading in Frankfurt.

Part of the bank’s strategy has been acquiring other banks. In October, it announced it would buy Sal. Oppenheim Group private bank for euro1.1 billion to bolster its wealth management operations.

It also bought ABN Amro Holding NV’s commercial banking group in the Netherlands. Last year, Deutsche Bank took a stake in German retail bank Deutsche Postbank AG.

Looking ahead, Ackermann said that the bank sees a “clear trend” for the recovery and stabilization of markets — “although the effects of the recent crisis will take time to work through.”

Deutsche Bank said its corporate banking and securities revenues slipped to euro2.9 billion in the fourth quarter from euro3.7 billion a year earlier.

Revenue in sales and trading, including the debt and other products, was euro1.3 billion, compared with a negative euro2.7 billion in the final three months of 2008.

Revenue in the corporate investments division rose as well, reaching euro3.5 billion — a contrast with the negative euro3 billion in the final three months of 2008.

Deutsche Bank’s global transaction banking unit saw fourth-quarter revenues slip to euro629 million from euro751 million, a decline it blamed on the low interest rates in the U.S., Europe and Britain.

Its private clients and asset management group saw a gain in revenue for the final quarter, rising by euro177 million to euro2.2 billion. Its asset and wealth management revenue rose to euro784 million from euro585 million.

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