A debt trading windfall helped Deutsche Bank trump market forecasts to swing to a first quarter profit of 1.2 billion euro ($1.6 billion), masking the erosion of its key businesses by the economic crisis.
Deutsche Bank reported a loss in its wealth management arm and a dip in profits at its retail bank while chalking up 1.5 billion euros in writedowns.
"Looking forward, we see continued challenges, but also opportunities," Chief Executive Josef Ackermann said in a statement, which came the day after he agreed to extend his tenure as the bank had failed to find a successor.
Germany's flagship financier was lifted out of slump with bumper revenue from sales and trading of debt, which rose almost three-fold to 3.8 billion euros.
This helped the bank reach a net profit of 1.2 billion euros in the first three months of the year, compared to a loss of 141 million euros a year earlier, beating all the analysts' forecasts in a Reuters poll.
However, some analysts and traders were sceptical that it would get the same windfall later in the year.
"It is an impressive result," said fund manager Dieter Ewald from Frankfurt Trust, which owns shares in Deutsche. "Sales and trading are the main reason. The question is if this comes again. The first quarter is traditionally the strongest."
Kian Abouhossein, a JP Morgan analyst, cheered the news but also flagged Deutsche Bank's dependence on debt trading.
"The results were purely driven by fixed income and CBS (corporate banking and securities)," Abouhossein said. "Other divisions look below expectations, for example asset and wealth management, retail and transaction banking."
Deutsche Bank shares fell more than 6 percent in early trading to 40.65 euros, lagging a 2.7 percent drop in the DJ Stoxx European banking index.
HERO RETURNS
The sudden reemergence of investment banking — which has been Deutsche Bank's golden goose under Ackermann's watch — comes despite continuing market ructions.
But elsewhere there was evidence that the worst global downturn in a generation was leaving its mark on the bank.
The so-called stable businesses, which Ackermann has championed as a counterbalance to the more volatile investment banking, are showing signs of strain.
Asset and wealth management racked up a pretax loss of 173 million euros compared to a profit of nearly as much a year earlier, while retail bank earnings shrivelled by a third.
It announced additional writedowns, mainly on monoline insurers and a property project.
Ackermann, who initially described the crisis as over for the bank before it had really begun, has overseen more than 10 billion euros in writedowns as profits have come under pressure.
Investors value Deutsche Bank stock at a discount to its two big European investment banking rivals, UBS and Credit Suisse.
Deutsche's stock trades on a multiple of 10 times forecast future earnings, according to StarMine, trailing Credit Suisse's almost 15 times or UBS's more than 12 times.
