Deutsche Bank posts better-than-expected 2nd quarter earnings

Deutsche Bank 2nd-quarter profit up 9 percent

BERLIN — Deutsche Bank AG, Germany’s biggest, reported a 9 percent rise in second-quarter earnings on Tuesday as gains at its transaction banking and asset management operations helped counter a weaker investment banking performance.

The company, based in Frankfurt, said net earnings were up to nearly €1.2 billion ($1.55 billion) from €1.1 billion a year earlier — beating analysts’ forecast of €1.05 billion.

Deutsche Bank’s shares rose strongly on the results, and were up 5.5 percent at €53.17 in afternoon Frankfurt trading.

Pretax earnings rose 16 percent, to €1.5 billion from €1.3 billion.

Deutsche Bank said overall revenue declined in the April-June period — a volatile quarter that included the peak of the eurozone debt crisis — to €7.2 billion from €7.9 billion a year earlier. However, set-asides for bad loans declined sharply to €243 million from €1 billion in last year’s second quarter.

“In a quarter which was characterized by increased investor uncertainty and higher market volatility, Deutsche Bank’s investment banking business followed the industry-wide trend of weaker profitability,” CEO Josef Ackermann said in a statement.

However, he pointed to “very solid” performances from other divisions and said the bank’s private and business client segment had its best quarterly result since the peak of the financial crisis — demonstrating “the strength of our diversified business portfolio.”

Deutsche Bank’s corporate and investment bank unit saw revenues decline to €4.7 billion from €5.3 billion.

However, revenues in global transaction banking rose to €1.1 billion from €654 million — bolstered by €338 million in extra revenue from Deutsche’s acquisition of parts of ABN Amro Bank NV’s commercial banking activities in the Netherlands.

Revenues at the asset and wealth management division were up 57 percent at €969 million, helped by €148 million from private bank Sal. Oppenheim Jr. & Cie S.C.A. Group, which Deutsche Bank acquired last year. Private and business client revenues were up 2 percent at €1.4 billion, the company said.

“Global economic activity is likely to strengthen and the new regulatory framework is finally taking shape,” Ackermann said. He added that “Deutsche Bank considers itself well positioned to continuously creating sustainable value for its shareholders.”

The bank said its tier 1 capital ratio, a key barometer of financial health, was 11.3 percent at the end of the second quarter — up from 11 percent a year earlier and 11.2 percent at the end of the first quarter. The figure was above the bank’s target of 10 percent.

Deutsche Bank was one of 14 lenders in Germany that underwent recent European “stress tests” to determine how they would fare in a deeper economic and debt crisis.

It passed easily — the tests determined that, in a worst-case scenario, its capital ratio would slip to 9.7 percent, far above the 6 percent pass mark.

According to a presentation by chief financial officer Stefan Krause, Deutsche Bank’s net exposure to financially troubled Greece totaled €1.09 billion at the end of March and to Spain just over €1 billion. The bank had no exposure to Portuguese or Irish bonds.

For the January-June period, Deutsche Bank’s net profit was up 31 percent to more than €2.9 billion from last year’s €2.25 billion. Pretax earnings rose to €4.3 billion from €3.1 billion.