03/05/2006 14:19
Deutsche Bank AG, Europe's biggest securities firm, said first-quarter profit rose a greater-than- expected 55 percent on record revenue from sales and trading.
Net income increased to 1.7 billion euros ($2.1 billion), or 3.3 euros a share, from 1.1 billion euros, or 2.09 euros, a year earlier, the bank said in a statement today. That beat the 1.31 billion-euro median estimate of 22 analysts surveyed by Bloomberg News. Revenue rose 21 percent to 8 billion euros.
Chief Executive Officer Josef Ackermann, who combined the lagging equities trading business with debt trading under Anshu Jain in 2004, pushed pretax return on equity to 40 percent in the quarter, the most profitable ever. Sales and trading revenue rose 37 percent, beating the average 29 percent increase of the Frankfurt-based company's top six Wall Street rivals.
``It's a very solid set of results,'' said Patrick Lemmens, who helps oversee about $3.5 billion at Amsterdam-based ABN Amro Asset Management and holds Deutsche Bank shares. ``Deutsche Bank has constantly told us that its trading revenue is well diversified, and I think they once again demonstrated this.''
Deutsche Bank shares, up 19 percent this year, rose 42 cents, or 0.4 percent, 97.65 euros as of 11:37 a.m. in Frankfurt, giving the company a market value of about 50 billion euros.
`Full Benefits'
Since taking over four years ago, Ackermann, 58, has turned Deutsche Bank into Wall Street's No. 2 trader after New York-based Goldman Sachs Group Inc. and boosted the company's return on equity by almost 29 percentage points from 11.4 percent in 2002. In February, he said the bank would invest in equity derivatives and mortgage-backed securities in the U.S. to increase revenue.
Deutsche Bank's profit was the highest since the company started reporting under the U.S. accounting standards in 2001. The bank has beat analysts' estimates in the past six quarters.
Revenue from debt sales and trading, the bank's biggest money maker, rose 19 percent to a record 2.8 billion euros in the first quarter, helped by increased client trading in credit derivatives and currencies. Equities trading surged 90 percent to 1.6 billion euros after the ``tighter alignment with fixed income'' helped boost growth in equity derivatives and emerging markets.
``We reaped full benefits from our strategic positioning, our integrated business model and our focused investments in growth businesses and models,'' Ackermann said in a statement on the company's web site today. ``Deutsche Bank is very well positioned for continued success.''
`More Confident'
Pretax profit at the corporate banking and securities unit run by Jain, 43, and Michael Cohrs, 49, rose 43 percent to 1.93 billion euros, beating the median analyst estimate of 1.58 billion euros. The bank makes almost two-thirds of earnings from the division. Consumer banking profit increased 34 percent to 312 million euros.
Ackermann said in February that Deutsche Bank will aim to sustain its pretax return on equity at about 25 percent and target double-digit growth in earnings per share as it builds the investment banking and consumer banking businesses.
The company is ``much more confident'' about its targets after the quarter, Chief Financial Officer Clemens Boersig said on a conference call with analysts. Boersig will be replaced by Anthony Di Iorio on May 4 when he becomes supervisory board chairman.
Deutsche Bank's results were ``exceptionally good,'' said Thomas Koerfgen, who oversees $3.7 billion as head of equities at SEB Investment in Frankfurt. ``There were improvements in every division.'' Still, the company probably won't be able to maintain a return of equity of 40 percent as it expands, Koerfgen said.
U.S. Hires
Deutsche Bank has hired at least 20 people in the U.S. this year, including three UBS AG executives for stock sales and trading, as it tries to get a bigger piece of the more than $100 billion of trading revenue made by the top 10 brokerages in 2005.
Costs at Deutsche Bank rose 14 percent to 5.4 billion euros as compensation expenses gained 21 percent to 3.6 billion, reflecting higher bonus accruals. Non-compensation costs rose 10 percent to 1.7 billion euros, party because of ``investments in growth initiatives.'' Deutsche Bank's headcount rose by 676 people.
The bank ``has succeeded in reducing the gap to the U.S. rivals somewhat, but it's still not where a company with investment banking as its main business should be,'' said Dieter Ewald, who helps manage $12.7 billion, including Deutsche Bank shares, at Frankfurt Trust. Ewald spoke before the earnings were released.
Goldman boosted revenue from equities trading by 58 percent to $2.45 billion in its first quarter as fixed-income revenue rose 50 percent to $3.74 billion. Deutsche Bank surpassed its other top U.S. rivals, New York-based Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc., Citigroup Inc. and JPMorgan Chase & Co., in sales and trading revenue in the quarter.
Mergers, Underwriting
Deutsche Bank's fees from underwriting stock and bond sales and advising on mergers increased 27 percent to 648 million euros in the quarter, lower than the median analyst estimate of 655 million euros. Underwriting and merger fees boosted Goldman's revenue from investment banking 65 percent in the first quarter.
The bank ranked second in underwriting international bonds in the first quarter behind Citigroup Inc., unchanged from a year ago, according to data compiled by Bloomberg. It ranked 7th in equity and equity-linked offerings, up from 10th. In completed mergers, the bank moved to 8th place from 9th, the data show.
At the asset and wealth management unit, profit rose 75 percent to 225 million euros. Deutsche Bank is trying to revamp the unit and pushing into consumer banking markets in China and India to provide a buffer for potential volatility of investment banking.
Zurich-based UBS, Europe's biggest bank by assets, may tomorrow report a 15 percent increase in net income to 3 billion Swiss francs ($2.4 billion), led by fees from managing money and higher earnings from trading, according to the median estimate of 12 analysts. Credit Suisse Group yesterday said first-quarter net income rose 36 percent to 2.6 billion francs.
Net income increased to 1.7 billion euros ($2.1 billion), or 3.3 euros a share, from 1.1 billion euros, or 2.09 euros, a year earlier, the bank said in a statement today. That beat the 1.31 billion-euro median estimate of 22 analysts surveyed by Bloomberg News. Revenue rose 21 percent to 8 billion euros.
Chief Executive Officer Josef Ackermann, who combined the lagging equities trading business with debt trading under Anshu Jain in 2004, pushed pretax return on equity to 40 percent in the quarter, the most profitable ever. Sales and trading revenue rose 37 percent, beating the average 29 percent increase of the Frankfurt-based company's top six Wall Street rivals.
``It's a very solid set of results,'' said Patrick Lemmens, who helps oversee about $3.5 billion at Amsterdam-based ABN Amro Asset Management and holds Deutsche Bank shares. ``Deutsche Bank has constantly told us that its trading revenue is well diversified, and I think they once again demonstrated this.''
Deutsche Bank shares, up 19 percent this year, rose 42 cents, or 0.4 percent, 97.65 euros as of 11:37 a.m. in Frankfurt, giving the company a market value of about 50 billion euros.
`Full Benefits'
Since taking over four years ago, Ackermann, 58, has turned Deutsche Bank into Wall Street's No. 2 trader after New York-based Goldman Sachs Group Inc. and boosted the company's return on equity by almost 29 percentage points from 11.4 percent in 2002. In February, he said the bank would invest in equity derivatives and mortgage-backed securities in the U.S. to increase revenue.
Deutsche Bank's profit was the highest since the company started reporting under the U.S. accounting standards in 2001. The bank has beat analysts' estimates in the past six quarters.
Revenue from debt sales and trading, the bank's biggest money maker, rose 19 percent to a record 2.8 billion euros in the first quarter, helped by increased client trading in credit derivatives and currencies. Equities trading surged 90 percent to 1.6 billion euros after the ``tighter alignment with fixed income'' helped boost growth in equity derivatives and emerging markets.
``We reaped full benefits from our strategic positioning, our integrated business model and our focused investments in growth businesses and models,'' Ackermann said in a statement on the company's web site today. ``Deutsche Bank is very well positioned for continued success.''
`More Confident'
Pretax profit at the corporate banking and securities unit run by Jain, 43, and Michael Cohrs, 49, rose 43 percent to 1.93 billion euros, beating the median analyst estimate of 1.58 billion euros. The bank makes almost two-thirds of earnings from the division. Consumer banking profit increased 34 percent to 312 million euros.
Ackermann said in February that Deutsche Bank will aim to sustain its pretax return on equity at about 25 percent and target double-digit growth in earnings per share as it builds the investment banking and consumer banking businesses.
The company is ``much more confident'' about its targets after the quarter, Chief Financial Officer Clemens Boersig said on a conference call with analysts. Boersig will be replaced by Anthony Di Iorio on May 4 when he becomes supervisory board chairman.
Deutsche Bank's results were ``exceptionally good,'' said Thomas Koerfgen, who oversees $3.7 billion as head of equities at SEB Investment in Frankfurt. ``There were improvements in every division.'' Still, the company probably won't be able to maintain a return of equity of 40 percent as it expands, Koerfgen said.
U.S. Hires
Deutsche Bank has hired at least 20 people in the U.S. this year, including three UBS AG executives for stock sales and trading, as it tries to get a bigger piece of the more than $100 billion of trading revenue made by the top 10 brokerages in 2005.
Costs at Deutsche Bank rose 14 percent to 5.4 billion euros as compensation expenses gained 21 percent to 3.6 billion, reflecting higher bonus accruals. Non-compensation costs rose 10 percent to 1.7 billion euros, party because of ``investments in growth initiatives.'' Deutsche Bank's headcount rose by 676 people.
The bank ``has succeeded in reducing the gap to the U.S. rivals somewhat, but it's still not where a company with investment banking as its main business should be,'' said Dieter Ewald, who helps manage $12.7 billion, including Deutsche Bank shares, at Frankfurt Trust. Ewald spoke before the earnings were released.
Goldman boosted revenue from equities trading by 58 percent to $2.45 billion in its first quarter as fixed-income revenue rose 50 percent to $3.74 billion. Deutsche Bank surpassed its other top U.S. rivals, New York-based Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc., Citigroup Inc. and JPMorgan Chase & Co., in sales and trading revenue in the quarter.
Mergers, Underwriting
Deutsche Bank's fees from underwriting stock and bond sales and advising on mergers increased 27 percent to 648 million euros in the quarter, lower than the median analyst estimate of 655 million euros. Underwriting and merger fees boosted Goldman's revenue from investment banking 65 percent in the first quarter.
The bank ranked second in underwriting international bonds in the first quarter behind Citigroup Inc., unchanged from a year ago, according to data compiled by Bloomberg. It ranked 7th in equity and equity-linked offerings, up from 10th. In completed mergers, the bank moved to 8th place from 9th, the data show.
At the asset and wealth management unit, profit rose 75 percent to 225 million euros. Deutsche Bank is trying to revamp the unit and pushing into consumer banking markets in China and India to provide a buffer for potential volatility of investment banking.
Zurich-based UBS, Europe's biggest bank by assets, may tomorrow report a 15 percent increase in net income to 3 billion Swiss francs ($2.4 billion), led by fees from managing money and higher earnings from trading, according to the median estimate of 12 analysts. Credit Suisse Group yesterday said first-quarter net income rose 36 percent to 2.6 billion francs.
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