Deutsche Bank profit lower on acquisition charges

[February 03, 2011]  BERLIN (AP) -- Deutsche Bank AG's fourth-quarter and full-year earnings declined by more than half as it absorbed the cost of buying retail lender Deutsche Postbank and other acquisitions, but the company on Thursday reaffirmed an ambitious 2011 earnings target as revenues rose sharply.

Germany's biggest bank said it earned euro601 million ($831 million) in the October-December quarter. That was in line with guidance issued earlier this week -- down from euro1.32 billion a year earlier, a figure that was bolstered by tax breaks in the U.S.

Deutsche Bank said its quarterly net revenues were up 34 percent to euro7.43 billion, a record for the fourth quarter, from euro5.54 billion.

The consolidation of Postbank helped push revenues at the private clients and asset management division up 31 percent to euro2.8 billion, while revenue from the corporate and investment bank sector also rose 31 percent to euro4.6 billion, Deutsche Bank said.

CEO Josef Ackermann said that 2010 was "a year of investment and change for Deutsche Bank."

"We greatly improved our global market position and are eminently well placed for further growth," Ackermann said, reaffirming the bank's aim of pre-tax earnings of euro10 billion in 2011. Pre-tax earnings for 2010 came in just short of euro4 billion.

"Although fully aware of the remaining risks and uncertainties in the overall economic environment we are confident that we can meet those targets," Ackermann said.

Deutsche Bank embarked in September on a full takeover of Postbank, a move meant to strengthen its position in its home market and improve its revenue mix. The acquisition was helped by a euro10.2 billion capital increase.

Fourth-quarter noninterest expenses totaled euro6.31 billion, compared with euro4.22 billion a year earlier.

Deutsche Bank said that reflected the consolidation of Postbank, other acquisition-related costs such as the integration of private banking specialist Sal. Oppenheim Group and the "decision to accelerate strategic investments to realign the bank."

The company's provision for credit losses in the fourth quarter was down 28 percent to euro406 million from euro560 million a year earlier.

The bank's full-year net income totaled euro2.31 billion -- down from euro4.97 billion in 2009. Net revenues in 2010 climbed to euro28.57 billion from euro27.95 billion.

The company said it would propose a cash dividend of euro0.75 per share for 2010, unchanged from the previous year.

Full-year credit-loss provisions were down 52 percent to euro1.3 billion from euro2.6 billion, Deutsche Bank said.

Its core tier 1 capital ratio, a key measure of financial strength, stood at 8.7 percent at the end of the year -- unchanged from a year earlier.

Deutsche Bank shares were up 2.5 percent in Frankfurt trading at euro45.55, despite skepticism about the company's 2011 earnings target.

That target "looks a stretch," said Piers Brown, a banks researcher at Evolution Securities. He said revenues from corporate banking and securities were slightly below expectations and "the company has not bucked general market trends."

Brown maintained a sell recommendation on its shares, based on a view that Deutsche Bank is inadequately capitalized under the so-called Basel III rules on capital requirements for banks.

[Associated Press; By GEIR MOULSON]

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