Deutsche Bank’s results exceed expectations, stimulated by tax gains

Deutsche Bank’s results exceed expectations, stimulated by tax gains

10-21-2009 20:01

The Frankfurt-based Deutsche Bank AG reported that its third-quarter results surpassed analysts’ forecasts as they more than tripled, spurred by tax gains. Germany’s largest bank stated this Wednesday that preliminary net income climbed to €1.4 billion ($2.1 billion) in contrast to €435 million the corresponding period of the previous year, while the median forecast of 12 analysts demonstrated a net income of €811 million.

Deutsche Bank’s results

Josef Ackermann, CEO of Deutsche Bank, avoided the most intense period of the credit crunch and refused government support. Analysts believe that Deutsche Bank benefited from the lowest interest levels ever, which pushed profits from trading debt, commodities and currencies up to the highest level ever at JPMorgan Chase & Co. and to the third-strongest level ever at Goldman Sachs Group Inc. Earnings before taxes did not exceed all forecasts by analysts, on which Deutsche Bank equities dropped 5%.

Fair judgment

Matthew Clark, an analyst with Keefe, Bruyette & Woods Inc. in London, commented: “Earlier, a comparable rather equivocal reaction was the result of United States investment banking data, while the most important pretax data were disappointing. Clark, who has a ‘market outperform rating’ on the Deutsche Bank equity, continued by saying: “For the present we aren’t able to judge the quality, so we have to wait to make a fair judgment.”

Deutsche Bank share

Earnings before taxes were about €1.3 billion, while Clark forecasted €1.53 billion. The median analyst estimations was €1.19 billion.
At 10:33 a.m. in Frankfurt trading, the Deutsche Bank share fell 3.7% at €53.31. The DB equity has climbed 92% in 2009, while the international universal bank values €33.1 billion.

Stimulated by tax gains

Deutsche Bank stated that net income was driven by favorable conclusions of tax revises regarding preceding years and by tax credits. The bank will post positive figures in all business segments. “Due to positive results posted by JPMorgan Chase & Co. and Goldman Sachs Group Inc., analysts forecasted that profits before taxes would beat all estimates, which wasn’t the case,” commented Olaf Kayser, an analyst at Landesbank Baden-Württemberg (LBBW). “Some market participants speculate that Deutsche Bank released the results early to set a capital rise.”
Tier 1 capital, a core gauge that indicates the financial strength of a bank from a regulator's point of view, climbed to 11.7% in the third quarter in comparison to 11% at the end of the second quarter.